Zaira Gonzalez

AGEC 5503

The Interaction of Population Growth and Environmental Quality

By Maureen Cropper and Charles Griffiths
Introduction and Objective
This paper focuses on the relationship between population growth and environmental
quality, a topic that has been widely studied in economics since Malthus introduced his theory of
population in 1978. The version of this theory discussed in the work of Cropper and Griffiths
focuses on the relationship between nonrenewable, natural resources and economic growth. The
authors try to understand what the effect of income per capita is on environmental degradation.
In addition, they are interested in other population pressures, such as change in population and
rural population density
Previous research indicates that the relationship between environmental quality and per
capita income has an inverted U shape: the environmental Kuznets curve. Originally, this curve
represents the theory that inequality rises as income per capita increases. However, after a
certain point, the level of inequality starts to decrease. Cropper and Griffiths adapt this theory by
replacing the level of inequality with the level of environmental degradation, creating the
environmental Kuznets curve.
Methodology
The authors are assuming there is an inverted U shape relationship between per capita
GDP and deforestation, implying that as a country becomes richer, logging and fuelwood
activities will increase. However, after the country achieves a certain level of income, these
activities will be replaced by more capital intensive ones. To estimate what the relationship
between environmental quality and per capita income is, the variable of change in forest area is
used as a proxy of environmental degradation. The main explanatory variable the study focuses
on is per capita GDP, and since the study tries to prove the U shape relationship of this variable
to the dependent variable, it is squared in the model.
The stage of economic development of a country will determine how strong the above
relationships are. The variables of rural population density, timber price, and growth in per
capita income serve as proxy for industrialization (labor will be hired in nonagricultural sectors).
Along with the rate of population growth variable, rural population density also accounts for the
effects of population pressures on the environment. The population pressures variables shift the
curve for deforestation to account for the fact that even if a country has reached a high level of
income, the deforestation rate might continue being higher than the deforestation rate of a lower
income country with low population pressures.

The following equation specifies the model built for the relationship between the rate of
deforestation and income distribution:

Where
Fit = forest area in country i in year t
RPD = rural population density
POP = percentage change in population
TP = Timber price
PCGDP = percentage change in per capita GDP
PCGDP = per capita GDP
uit = error term
To account for factors such as the distance of forests to cities and the shape of forests
(fragmented vs. clustered), which will influence the rate of deforestation but will change slowly
with time, the authors allow the intercept of the equation (a0,i) to vary across countries.
The authors used pooled cross-section and time-series data for each continent for the
periods 1961-1988 for the deforestation data from the Food and Agriculture Organizations
Production Yearbook. They decided to focus on developing countries (since these are the
countries suffering from deforestation) and thus did not include any of the OECD members in
their study. The data on population and per capita GDP was obtained from The Penn World
Table (Mark 5): An Expanded Set of International comparisons, 1950-1988 by Robert Summer
and Alan Heston.
Analysis/Results
The results of the equation estimated for different continents are reported on table 1. For
Africa, the regression effectively suggests an inverted U shape relationship between per capita
income and deforestation. The other two significant variables are the percentage change in per
capita income and the rural population density. The latter variable relationship implies that an
increase in rural population will translate in an increase of deforestation. In the case of Latin
America the significant variables were per capita income, the percentage change in per capita
income, and the price of tropical logs. The log variable significance reflects the intensity in the
practice of this activity in Latin America compared to the rest of the world. The per capita
income squared was nevertheless not significant.
The authors were surprised to find that none of the variables were statistically significant
for Asia. They believe that the aggressive reforestation programs might be understating the level
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of deforestation in the continent. However, without detailed data on both reforestation and
deforestation, it is not possible to perform a more rigorous analysis.
Cropper and Griffiths found that in Latin America, the turning point of the Kuznets curve
occurs when the rate of deforestation is 1.63 percent per annum (corresponding to an income of
$5420) and the intercept is zero (meaning that when there is no income there is also no
deforestation). The authors allowed the intercept to be zero since the rural population density
variable is not significant in the regression for Latin America. However, the intercept is taken
into account in the African model. Thus, for a country with a population density of .3 persons
per hectare, the peak deforestation rate will be 1.91 percent per year (corresponding to an income
of $4760). Both incomes were obtained by deriving the model equation for deforestation by the
per capita income variable. The result was made equal to zero in order to find the point at which
the curves slope is equal to zero.

***

*
**

***

**

***

*p > .10, **p > .05, ***p > .01

Critique
One of the main source of problems and weaknesses of the study was in the data used. As
common in the literature in global development, the data used in this research is missing country
information in some years, and only examines years through 1988. A better and/or updated
source of data would allow the study to generate more precise and reliable conclusions. In
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addition, the authors found that most of their observations fell to the left of the levels of income
at which rates of deforestation peak. That means that it is not as clear that the Kuznets
hypothesis would best describe the relationship between the dependent and independent
variables, but it is possible that the relationship could instead be described as a decreasing
marginal rate of deforestation levels as income increases. Their decision to not include OECD
countries in the study also limited the possible number of observations to the right of the peak
point. Although it is true that for most, if not all, the OECD countries deforestation is not widely
practiced, it is true that countries such as Turkey and Mexico went through significant economic
and social changes in the forms of urbanization and an increase in income, which would have
made the data richer, allowing the researchers to make further conclusions.
The use of deforestation as a proxy for environmental degradation might be too limited of
an indicator for the dependent variable. The fact that some countries deforestation levels
decrease with an increase of per capita income might be the result of industries replacing
deforestation with air pollution operations. Although the authors mention afforestation as a
possible cause of the lack of significance of the Asian model for the environmental Kuznets
curve, they fail to acknowledge that this bias will increase the significance of the estimated EKC
for both Latin America and Africa.
In the text, the authors mention that increasing the rate of growth in per capita income
by 8 percentage points reduces the rate of deforestation by only one-tenth of a percentage point.
They arrive at this conclusion by multiplying the coefficient -0.0123 * 8 = .0904. However, I
consider the authors commit are not interpreting the mathematical implications of their
conclusions correctly. It is evident that the relationship between this independent variable and
the dependent variable is inelastic: a change in the per-capita income level of a country will have
a very small change in deforestation. It seems as if the authors were trying to obtain a suggestive
conclusion from the results in table 1. However, changes in the variable value that multiplies the
coefficients can only be interpreted if changed in small amounts; otherwise it is hard to assess
the feasibility of their projections. A similar manipulation of numbers is performed when
interpreting the implications of deforestation and rural population density.
I would be interested to know how much would the models presented by the authors be
improved by the removal of insignificant variables. However, it is important to keep in mind
that even though they are not statistically important, some of these variables should be kept for
theoretical reasons.
Literature Review
Research on the environmental Kuznets curve has been done by other researchers using a
more comprehensive approach to measure environment. Shafik and Bandyopadhyay estimated
10 different EKCs using the indicators of lack of clean water, lack of urban sanitation, ambient
levels of suspended particulate matter (SPM), ambient sulfur oxides (SO2), change in forest area
between 1961-1986, the annual rate of deforestation, dissolved oxygen in rivers, fecal coliforms
in rivers, municipal waste per capita, and carbon emissions per capita. Among all these
variables, they find that only the two air pollutants conform to the Environmental Kuznets Curve
hypothesis. The income level of both pollutants turning points lay between $3,000 and $4,000.
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Theodore Panayoto (1993) estimated the Kuznets curve with the following variables as
indicators of environmental degradation: deforestation (proxy variable for natural resource
depletion) and sulphur dioxide (SO2), nitrogenous oxides (NO) and solid particulate matter
(SPM) (as proxy variables for industrial and energy-related pollutants). He found that
deforestation was positively correlated with population densities. Also, for the sample mean
population density, Panayotou found that the turning point for deforestation is $823 per capita,
$3,000 per capita for SOs emissions, $5,500 per capita for NOx, and $4,500 for solid particle
matter (SPM). Interestingly, both the Panayoto and the Shafik and Bandyopadhyay studies show
a lower turning point of income for environmental degradation.
Policy Recommendations
As the authors mention in their paper, the results in table 1 should not be interpreted as
indicating income growth as an automatic solution for environmental problems. Although the
study was done on developing countries, this discussion is relevant for the drafting of policies in
the US. The small coefficients in the percentage change in per capita income variable (which
was significant for both Africa and Latin America) suggest an inelastic relationship between an
increase of income and environmental degradation. Thus, the government must take an active
role in the preservation of the environment, since even if the US is currently on the downward
sloping part of its environmental Kuznets curve, the slope might be very small, indicating that an
increase in income will decrease the levels of environmental degradation by a very small
amount.
Although deforestation is affected by a countrys level of income, it is also by large a
consequence of the lack of property rights in developing countries. Therefore, a second policy
recommendation to the US government would concern the improvement of property rights, to
avoid market inefficiencies derived from the private cost of environmental degradation being
zero or an amount below their true value.
References
Cropper, M., & Griffiths, C. (1994). The interaction of population growth and environmental
quality. The American Economic Review, 250-254.
Panayotou, T. (1993). Empirical tests and policy analysis of environmental degradation at
different stages of economic development (No. 292778). International Labour Organization.
Shafik, N., & Bandyopadhyay, S. (1992). Economic growth and environmental quality: timeseries and cross-country evidence (Vol. 904). World Bank Publications.
Stern, D. I., Common, M. S., & Barbier, E. B. (1996). Economic growth and environmental
degradation: the environmental Kuznets curve and sustainable development. World
development, 24(7), 1151-1160.