ECONOMIC GROWTH AND THE ENVIRONMENTAL QUALITY IN SINGAPORE : A CRITICAL REVIEW OF THE ENVIRONMENTAL KUZNETS CURVE

Abstract

This academic exercise draws its motivation from the latest developments in the field of environmental economics. Recent research has examined the relationship between certain indicators of environmental quality and economic growth. Evidence from these studies suggests that some pollutants follow an inverse U-shape pattern relative to the countries' incomes. This relationship has been called the "environmental Kuznets curve". There has been speculation on the implications of this for economic and environmental policy. This study reviews the microfoundations of the environmental Kuznets curve and the empirical relationships between economic growth and the environmental quality. A simple and straight-forward static model of the empirical relationship between pollution and income is tested for the case of Singapore. This test covers three types of air pollution indicators, sulphur dioxide, nitrogen oxide and particulate matter concentrations. On examination of the reduced-form relationships between per capita GDP and the three pollution indicators, two of the three indicators show no evidence that environmental quality deteriorates steadily with economic growth. Instead, both sulphur dioxide and nitrogen oxide levels exhibit a decreasing relationship with income, between the range of $10000 to $33000 per capita GDP. To conclude, the results suggest that economic growth is significant in determining the state of the environment in Singapore. However, it must be cautioned that these results must be interpreted carefully. Economic growth per se is not the one and only solution for a cleaner environment. Rather, it is suggested that economic policies should be implemented together with environmental ones.