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Wealth Heterogeneity and Escape from the Poverty–Environment Trap
Author(s) -
IKEFUJI MASAKO,
HORII RYO
Publication year - 2007
Publication title -
journal of public economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.809
H-Index - 32
eISSN - 1467-9779
pISSN - 1097-3923
DOI - 10.1111/j.1467-9779.2007.00344.x
Subject(s) - poverty trap , poverty , trap (plumbing) , environmental quality , economics , environmental degradation , productivity , quality (philosophy) , degradation (telecommunications) , distribution (mathematics) , natural resource economics , ecology , biology , environmental science , macroeconomics , economic growth , computer science , philosophy , mathematical analysis , mathematics , epistemology , environmental engineering , telecommunications
A mutual link between poverty and environmental degradation is examined in an overlapping generations model. Environmental quality affects labor productivity and wealth dynamics, whereas wealth distribution determines the degree to which agents rely on technology that has a large environmental load, and therefore the evolution of environmental quality. This interaction creates a “poverty–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 from the poverty–environment trap, although it can have negative effects on both the environment and output when not in the trap.