Environmental Engel Curves

30 Pages Posted: 2 Feb 2015 Last revised: 23 Feb 2023

See all articles by Arik Levinson

Arik Levinson

Georgetown University - Department of Economics; National Bureau of Economic Research (NBER)

James H. O'Brien

Gettysburg College - Department of Economics

Date Written: January 2015

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.

Suggested Citation

Levinson, Arik M. and O'Brien, James, Environmental Engel Curves (January 2015). NBER Working Paper No. w20914, Available at SSRN: https://ssrn.com/abstract=2558966

Arik M. Levinson (Contact Author)

Georgetown University - Department of Economics ( email )

Washington, DC 20057
United States
202-687-5571 (Phone)
202-687-6102 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

James O'Brien

Gettysburg College - Department of Economics ( email )

United States

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