Growth and the environment: taking into account structural transformation

Julien Wolfersberger

Working Papers from HAL

Abstract: This paper analyzes how structural transformation (as defined by the reallocation of economic activity across sectors) can explain the differences in pollution emissions across countries. Since pollution per unit of output differs across sectors, environmental quality can vary as a result of the rise of services at the expense of industry and in absence of environmental policy: this is the composition effect. An amended model of structural transformation is developed, where pollution is a by-product of output, and the predictions of the model are then tested empirically by studying labor reallocation and carbon emissions in 120 countries over the 1992-2014 period. The results show that composition is crucial to understand the differences in CO2 emissions across countries, and that the determinants vary according to countries' stages of structural transformation. We also find that the importance of convergence, traditionally the main factor to explain the dynamic effect of economic growth on the environment, is lowered by more than 30% when structural transformation is taken into account.

Keywords: Environment; Structural transformation; Growth JEL codes: O41; O44; Q50 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-ene and nep-env
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