Title: Aid, economic growth and environmental sustainability: rich-poor interactions and environmental choices in developing countries

Authors: Alexander Pfaff, Paulo Barelli, Shubham Chaudhuri

Addresses: SIPA, Economics, CERC/EEEB & IRI, Room 1306 IAB, 420 West 118th Street, Columbia University, New York, NY 10027, USA. ' University of Rochester, 236 Harkness Hall, Rochester, NY 14627, USA. ' Department of International and Public Affairs, Department of Economics, Columbia University, MC-3323, New York, NY 10027, USA

Abstract: Rich-poor interactions complicate the search for a stable Environmental Kuznets Curve (an ||inverted U|| relationship between income per-capita and environmental degradation). We show that aid from richer to poorer countries to support investments in environment, in either of two forms, alters the income-environment relationships that otherwise exist, lowering levels of degradation in the poorer countries conditional upon their incomes. Yet even with environmental aid, in our model, environmental quality eventually falls as economic growth continues, although ongoing innovation could change that conclusion. In light of this result, we show that subsidies to clean goods, one form of technological-transfer aid programme, dominate income transfers as environmental aid policy by the rich. Given that aid matters, we then show that when rich countries degrade the environment, a perverse effect exists: when an aid-giving country becomes richer, it gives less said to the poor country. This is stronger when that degradation is durable, that is, when consumption and degradation by the rich country in the past has durable effects upon the environment.

Keywords: aid; development; environment; economic growth; technology transfer; environmental degradation; rich-poor interactions; environmental quality; developing countries; sustainable development; environmental sustainability.

DOI: 10.1504/IJGENVI.2004.005288

International Journal of Global Environmental Issues, 2004 Vol.4 No.1/2/3, pp.139 - 159

Published online: 19 Sep 2004 *

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