The Role of Property Rights in Determining the Environmental Quality-Income Relationship

Abstract

This paper examines the role of property rights in shaping the relationship between environmental quality and income, largely missed in the literature. We develop an analytical framework that integrates the effects of property rights evolution, natural resource attributes, agent characteristics, and production technology on the environment-income relationship. The substantive strength of this framework lies in its ability to rationalize a wide range of environment-income relationships. The model shows that the U-shaped environment-income relationship, which is consistent with the Environmental Kuznets Curve (EKC) hypothesis, can arise only under specific model conditions. Thus the framework provides an additional explanation for non-universality of EKC. We provide evidence in support of our framework from case studies of various natural resources.

Keywords: Environment and Income, Property Rights

JEL Classification: Q56, P48