Wealth Heterogeneity and Escape from the Poverty-Environment Trap

Masako Ikefuji and Ryo Horii

No 05-09, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: A mutual link between poverty and environmental degradation is examined in an overlapping generations model with environmental externality, human capital, and credit constraints. Environmental quality affects labor productivity and thus wealth dynamics, whereas wealth distribution determines the degree to which agents rely upon natural resources and therefore the evolution of environmental quality. This interaction creates a epoverty-environment trap,' where a deteriorated environment lowers income, which in turn accelerates environmental degradation. We show that greater wealth heterogeneity is the key to escaping the poverty-environment trap, although it has negative effects both on the environment and output when not in the trap.

Keywords: Poverty trap; Environmental degradation; Wealth distribution; Human capital. (search for similar items in EconPapers)
JEL-codes: O11 O13 O15 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2005-05
New Economics Papers: this item is included in nep-dev and nep-env
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Wealth Heterogeneity and Escape from the Poverty–Environment Trap (2007)
Working Paper: Wealth Heterogeneity and Escape from the Poverty-Environment Trap (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:osk:wpaper:0509

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