Is Air Quality Income Elastic? Revisiting the Environmental Kuznets Curve Hypothesis.” Working Paper WP0207

It is generally assumed that the Environmental Kuznets Curve relationship between pollution and income is due to the combined effects of economic scale, composition, technical change, trade policy, and consumer demand for environmental quality. The aim of this paper is to isolate the empirical magnitude of the last factor. The pollution-income relationship is estimated while controlling for the influence of the other factors, and socio-economic factors such as race, education, housing, and propensity for collective action. The analysis is based on 1990 ambient concentrations of five air pollutants and data for U.S. census tracts. An inverted U-shaped curve is obtained in the case of PM10. For NOx the curve is U-shaped. For the remaining gases the relationship between ambient concentrations and median household income is statistically insignificant. Consequently, while the income elasticity of pollution is negative and monotonically declining for PM10, it is positive and rising in the case of NOx. Furthermore, there is evidence to suggest that these results may also hold for other point source and non-point source pollutants, respectively. These results question the long-term global applicability of the Environmental Kuznets Curve