Horizon CDT Research Highlights

Research Highlights

Modelling the Relationship between Environmental Degradation and Economic Development

  Long Wen (2014 cohort)   www.nottingham.ac.uk/~psxlw

Modelling the Relationship between Environmental Degradation and Economic Development

There has been extensive literature that try to explore the relationship between economic development and environmental degradation. The ground-breaking empirical study by Grossman and Krueger [1] first introduced the environmental Kuznets curve (EKC) concept. EKC is a hypothesized relationship between environmental quality, measured by various environmental indicators like sulphur dioxide and carbon dioxide emission per capita, and level of economic development, usually measured in terms of income per capita or GDP per capita. The environmental degradation first increase with the economic development, but past a certain level of economic development, economic development will lead to environmental improvement. The turning point varies for different environmental indicators. The formation of the EKC is explained by various theories, including factors scale effect, structure mix, technological advancement and increasing demand for better environment.

Although there have been extensive studies conducted that support EKC, there are also a lot of studies that show inconsistent results. , the results are highly dependent on specifications of models, the data sets and environmental indicators. In addition, most of the EKC studies are flawed because they fail to take account of some statistical problems such as omitted variables, heteroskedasticity, simultaneity or cointegration. When appropriate diagnostic statistics and tests are taken into account, most of the studies showed the EKC don’t exist or even have a contradictory shape. It is rather hard to decide what we can infer from these studies. The relationship between environmental degradation and economic development may likely be a mix of different shaped curves, based on the regions, countries and other variables [2].

There have been several alternative approaches that emerged to modeling the environment-income relationship. One of the most prominent methods is decomposition analysis. This approach carries out decomposition of emissions into the proximate sources of emissions changes.

This PhD topic aims to identify the relationship between environmental degradation and economic development based on solid statistical analysis. This could involve building different models based on the features of the data and the environmental indicators. Especially in case like China, currently most work on China's environmental studies have two problems, one is the data they adopted are rather weak, the other is the econometric methods they adopted are also weak. There is urgent need for understanding this relationship. This study could provide some insights about this relationship and facilitate policy making.


  1. Grossman, G.M., Krueger, A.B., 1991. Environmental impacts of a North American free trade agreement. National Bureau of Economic Research.
  2. Dasgupta, S., Laplante, B., Wang, H., Wheeler, D., 2002. Confronting the Environmental Kuznets Curve. J. Econ. Perspect. 16, 147–168.

This work was carried out at the International Doctoral Innovation Centre (IDIC). The authors acknowledge the financial support from Ningbo Education Bureau, Ningbo Science and Technology Bureau, China's MOST, and the University of Nottingham. The work is also partially supported by EPSRC grant no EP/L015463/1.