How Economic Development Influences the Environment

Abstract

Reducing global poverty and addressing climate change and other environmental crises are among the most important challenges facing humanity today. This review discusses one way in which these problems are intertwined: how economic development affects the environment. I synthesize recent micro-empirical research on the environmental effects of economic development in low- and middle-income countries. The studies that I discuss identify the causal effects of specific aspects of economic development, such as greater household purchasing power, expanded access to credit, more secure property rights, technological progress, and stronger regulatory capacity. I conclude by outlining some gaps in the literature. Expected final online publication date for the Annual Review of Economics, Volume 14 is August 2022. Please see http://www.annualreviews.org/page/journal/pubdates for revised estimates.

Beyond the barrels: The impact of resource wealth on the energy-economy-climate targets in oil-rich economies

“…Moreover, economic development, as often proxied by income per capita, is a constellation of several other driving elements (e.g., institutional quality, physical infrastructure, financial markets, human capital). Which, in conjunction with higher income, can have diverging environmental effects [ 52 ]. These subtleties make it difficult to detect the true causal relationship between income growth and the environment; hence, there is limited consensus on the empirical validity of the EKC hypothesis [ 53 ].…”

Trade and Water Pollution: Evidence from China

“…The ecological environment, construction, and economic development show a trend of incoherence. Economic growth is accompanied by increased energy consumption [1]. In particular, the development of energy-intensive industries has severe environmental consequences for developing economies [2], and further research has pointed out that China's local governments are motivated to neglect ecological balance in service of their goals of economic growth goals [3].…”

The Role of Sanctions and Spillovers in Forest Conservation

“…Governments rely on conservation policies to align agents' deforestation decisions with their social costs and combat excessive extraction. However, weak state capacity often hinders these efforts, particularly in developing countries where deforestation is more prevalent (Jayachandran, 2022;Balboni et al, 2022). There is a growing body of knowledge on how specific policies affect deforestation, such as payments for ecosystem services (Jayachandran et al, 2017), conditional rural credit (Assunção et al, 2020), land titling programs (Probst et al, 2020), and command-and-control actions (Assunção et al, 2022a), but an understanding of the mechanisms driving behavioral changes remains scarce.…”