Working Paper: NBER ID: w20914
Authors: Arik Levinson; James O'Brien
Abstract: Environmental Engel curves (EECs) plot the relationship between households’ incomes and the pollution embodied in the goods and services they consume. They provide a basis for estimating the degree to which observed environmental improvements, which come in part from changing consumption patterns, can be attributed to income growth. We calculate a set of annual EECs for the United States from 1984 to 2002, revealing three clear results. First, EECs are upward sloping: richer households are indirectly responsible for more pollution. Second, EECs are convex, with income elasticities of less than one. Third, EECs have been shifting down over time: at every level of income households are responsible for decreasing amounts of pollution. We show that even without changes to production techniques, the pollution necessary to produce the goods and services American households consume would have declined 5 to 8 percent, despite a 13 percent increase in real household incomes. Most of this improvement is attributable to households consuming a less pollution-intensive mix of goods, driven about equally by two factors: household income growth represented by movement along convex EECs; and economy-wide changes represented by downward shifts in EECs.
Keywords: Environmental Engel Curves; Pollution; Household Consumption; Income Growth
JEL Codes: Q56
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| pollution (Q53) | household income (D19) |
| EECs are concave (D11) | pollution increases at a decreasing rate (Q53) |
| household income (D19) | pollution (Q53) |
| household income (D19) | EECs (F36) |
| EECs (F36) | pollution (Q53) |
| EECs shift down over time (E32) | pollution decreases at given income levels (Q53) |
| income growth (O49) | less pollution-intensive mix of goods consumed (F64) |