Environmental Policy Options in the Multi-Regimes Framework

Summary

In this paper we extend the multi-regime framework to variables involved in the debate on economic growth and environmental quality, starting from a reexamination of the so-called Environmental Kuznets Curve. The aim is to discuss the double convergence hypothesis that implicitly stems from a recent line of research. According to it, some stylized facts would support the almost paradoxical hypothesis that economic growth produce not only cross-countries or regions convergence in per capita output, but also in (the demand of) environmental quality.

Factual analysis seems to reject the hypothesis of convergence in output or income levels. Available evidence, rather, seems to point out that there is no such a thing as a unique avenue to sustainable development while the convergence predicted in more conventional analyses, in particular within the framework of the so called Environmental Kuznets Curve, is far away from being demonstrated. Actual growth processes do differ from each other in a deep qualitative sense, to the effect of profoundly influencing final outcomes as well as the unfolding of the processes themselves. This reflects differences in initial conditions, of course, but also the different sectoral or integrated policies that have been implemented along the way.

Therefore, in contrast to the double convergence hypothesis, in our contribution we argue that growth is a necessary but not sufficient condition for the required change in the individuals preferences needed to shift social preferences away from private to public goods and that, moreover, the relationship between growth and environmental quality depends crucially upon the countrys growth model. Therefore, more than the quantitative it is the qualitative aspects that matters. The theoretical context that seems to lend itself to the analysis of such issues falls within the boundaries of the theories of endogenous growth. We argue that sustainable development, if it emerges at all, is the result of investment in immaterial capital (research, education and the like) more than the reflection of the exogenous forces (technological progress and demographic ) of the neoclassical theory. In the analysis of such issues, the environment offered by the multiregime approach proves useful as it highlights the qualitative properties of the dynamic processes, instead of focusing upon quantitative estimation of some special asymptotic states whose existence is often all but to be demonstrated.

This paper was read at the Third Latin American-European Workshop, October 3–5, 2002, Guanajuato, México. We are indebted to the two referees for their useful and stimulating comments and suggestions. All remaining errors are ours. Research for this paper has been carried out as part of the research project funded by PAR, University of Siena