Air Pollution and ‘Dirty’ Industries: How and Why Does the Composition of Manufacturing Output Change with Economic Development?

Matthew Cole

Environmental & Resource Economics, 2000, vol. 17, issue 1, 109-123

Abstract: This paper examines the impact on air pollution ofchanges in the composition of manufacturing output indeveloped and developing countries. Pollutionemissions from manufacturing output are estimated ina manner which holds constant the effect of technologyand regulations allowing the impact of compositional changes alone on pollution to beestimated. The paper has three main findings; (1) theinverted-U estimated between per capita income and thepollution intensity of GDP arises due to both thecomposition of manufacturing becoming cleaner and theshare of manufacturing output in GDP falling.Compositional changes alone are not responsible forthe inverted-U between per capita income and percapita emissions; (2) changes to the composition ofmanufacturing output are consistent with the pollutionhaven hypothesis, however there is clear evidence thatrising per capita incomes are associated with afalling income elasticity of demand for `dirty'products. This fact may explain the compositionalchanges that occur with development; (3) in additionto the income elasticity effect, the analysis suggeststhat land prices and to a lesser extent the prices oflabour and capital, determine the proportion of dirtyindustry within a country's manufacturing sector. Copyright Kluwer Academic Publishers 2000

Keywords: economic development; industrial composition; pollution havens; air pollution (search for similar items in EconPapers)
Date: 2000
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Citations: View citations in EconPapers (28)

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DOI: 10.1023/A:1008388221831

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