Reconciling the Environmental Kuznets Curve with the Free Rider Problem

Abstract

The current paper studies the Environmental Kuznets Curve (EKC) hypothesis, which claims a parabolic relation exists between per capita GDP and environmental degradation. This would suggest a developing nation could expect to increase pollution significantly during the beginnings of industrialization and then, as the country began switching to a service-oriented economy, could expect pollution levels to begin to eventually drop with increasing per capita income. There has been much debate over said issue and the main goal of this paper is to study how the environmental free rider problem may play a role in plaguing the validity of the EKC model. Environmental free riding would allow nations to externalize some of the costs of their pollution such that it may never become economical to lower pollution levels despite rising income. My research focuses on an empirical study of carbon dioxide and sulfur dioxide emissions and ultimately supports the hypothesis that the effects of the free rider problem can be expected to spuriously affect the validity of the EKC model for certain pollutants.