The Economics of Sustainable Development

by Kumar, Surender; Managi, Shunsuke

• ISBN13: 9780387981758
• ISBN10: 0387981756
• Format: Hardcover
• Copyright: 2009-06-25
• Publisher: Springer Verlag

Summary

This book provides a look at the current status and future potential of sustainable development in India. Macroeconomic developments, regional disparity and poverty situation, the trend in natural resource depletion and environmental degradation, trajectory of economic development, and conventional wealth are discussed. A history of environmental regulations and the current state of the environment in India are provided along with the possible reasons for non-compliance of environmental standards in the country. This book studies many different aspects of industries in India from supply and demand sides and efficiency and productivity analyses are provided in detail. Before the liberalization of its economy began in 1991, India had been one of the most over-regulated and closed economies in the world. Market productivity is examined and tests whether the post-reform period shows any improvement in productivity and efficiency in comparison to the pre-reform period. Other subjects are discussed, including the economic value that the urban population of India places on improving the air quality, the cost of sustainable industrial development, industrial water use and analysis of the relationship between the price of oil and the macro economy as it applies to India.Technological change is central to maintaining standards of living in modern economies with finite resources and increasingly stringent environmental goals. Successful environmental policies can contribute to efficiency by encouraging, rather than inhibiting, technological innovation. However, little research to date has focused on the design and implementation of environmental regulations that encourage technological progress, or in insuring productivity improvements in the face of increasing stringency of environmental regulations, especially in developing countries. This study models and measures productivity change, with an application to India using Data Envelopment Analysis, which is critical because energy resources are central to sustaining an economy. The traditional issues of measuring productivity change were recast by recognizing that production activity implicitly embodies joint production of market and environmental outputs. Furthermore, the Porter Hypothesis, which states that well designed environmental regulations can potentially contribute to productive efficiency in the long run by encouraging innovation, is tested using the panel data of 92 water-polluting firms.

Table of Contents

Introduction	p. 1
The Emerging Giant	p. 1
The Problems	p. 2
What We Do	p. 4
Macroeconomic Development and the Environment
Economic Development and Environment	p. 11
Introduction	p. 11
Country Profile	p. 12
Geographical Profile	p. 12
Physiographic Conditions	p. 12
Sociocultural Conditions	p. 13
Indian Polity and Governance	p. 13
Macroeconomic Growth	p. 14
Poverty and Regional Disparities	p. 18
Depletion of Natural Resources and Environmental Degradation	p. 23
Sustainability of Growth	p. 28
Conclusions	p. 35
Environmental Regulations and Compliance in India	p. 37
Introduction	p. 37
Environmental Regulations in India	p. 38
Formal Regulations	p. 40
The Institutional Framework for Environmental Management: A Brief History	p. 41
Environmental Laws	p. 42
Fiscal Instruments for Pollution Control in India	p. 43
Review of Some Recent Studies	p. 45
Informal Regulation and People's Participation	p. 47
Current State of India's Environment	p. 50
Water Pollution	p. 51
Water Pollution from Households	p. 52
Water Pollution Loads from Industries	p. 52
Water Pollution from Agriculture	p. 52
Effects of Water Pollution	p. 53
Air Pollution	p. 54
Land and Forests	p. 55
Valuation of Environmental Degradation in India	p. 57
Causes of Poor Environmental Compliance	p. 58
Concluding Remarks	p. 60
Key Environmental Legislation in India: An Illustrative List	p. 61
Major Polluting Industries	p. 62
Sector-wise Compliance Status of 17 Categories of Highly Pollutions Industries (June 2006)	p. 63
Intergovernmental Fiscal Transfers and the Environment	p. 65
Introduction	p. 65
Theory of Fiscal Federalism and the Environment	p. 67
Decentralization and the Environment	p. 67
Designing Fiscal Transfers for Environmental Sustainability	p. 69
Fiscal Federalism and the Environment in India	p. 70
Fiscal Federalism in India	p. 70
Fiscal Transfers and Provision of Environmental Services in India	p. 72
Fiscal Options for Integration of Environmental Services into Fiscal Transfers	p. 75
Integrating Ecological Indicators into Fiscal Transfers: An Illustration	p. 76
Conclusions	p. 80
Industrial Development and Benefits and Costs of the Environmental Regulations
Total Factor Productivity of Indian Industry	p. 85
Introduction	p. 85
Measurement of Total Factor Productivity	p. 87
Total Factor Productivity of Indian Industry	p. 91
Technical Efficiency Estimates	p. 93
Total Factor Productivity Estimates	p. 94
Innovative States and Convergence	p. 101
Conclusions	p. 104
Valuing the Benefits of Air Pollution Abatement	p. 107
Introduction	p. 107
Panipat Thermal Power Station	p. 109
Questionnaire and Survey Format	p. 110
Application of Revealed Preference Method	p. 112
The Model	p. 112
Empirical Estimates of WTP	p. 114
Application of Contingent Valuation Method	p. 117
The Model	p. 120
Results	p. 121
Comparison Between WTP Obtained from CVM and Mitigation Behavior	p. 123
Conclusions	p. 124
Environmental Regulation and Production Efficiency	p. 127
Introduction	p. 127
Output Distance Function and Its Econometric Estimation	p. 128
Econometric Output Distance Function	p. 129
A Model for Determinants of Technical Inefficiency	p. 130
Production Efficiency of Thermal-Power Sector in India	p. 131
Data	p. 131
Estimation Procedures and Results	p. 132
Results	p. 133
Conclusion	p. 136
Cost of Environmentally Sustainable Industrial Development	p. 139
Introduction	p. 139
Measuring Cost of Sustainable Industrial Development	p. 141
Output Distance Function	p. 141
Derivation of Shadow Prices of Bad Outputs	p. 142
Scale Economies	p. 143
Estimation of Output Distance Function	p. 143
Translog Output Distance Function and Data	p. 143
Estimation of Output Distance Function: Programming Model	p. 145
Stochastic Output Distance Function	p. 146
Estimates of Shadow Prices, Scale Economies, and Technical Efficiency	p. 150
Shadow Prices	p. 150
Technical Efficiency	p. 152
Scale Economies	p. 153
Conclusion	p. 154
Appendix: Estimates of Shadow Price of BOD and COD and Technical Efficiency and Economics of Scale	p. 155
Win-Win Opportunities and Environmental Regulation: Test of the Porter Hypothesis	p. 157
Introduction	p. 157
Methodology for Testing Porter Hypothesis	p. 159
Output Distance Function Approach	p. 160
Econometric Estimation of Distance Functions	p. 161
Relationship Between Technical Inefficiency and Environmental Regulation	p. 162
Data and Translog Distance Function	p. 162
Results	p. 163
Conclusion	p. 166
Industrial Water Demand and Shadow Price	p. 167
Introduction	p. 167
Economic Model	p. 169
Estimation Model	p. 172
Data and Estimation Results	p. 173
Shadow Price of Water	p. 175
Analysis of Derived Demand for Water	p. 176
Conclusions	p. 179
Environmental Productivity, Oil Prices and Induced Innovations
Environmental Productivity and Kuznets Curve	p. 185
Introduction	p. 185
Environmental Policies in India	p. 187
Models	p. 188
Measurement of Productivity	p. 188
Kuznets Curve Relationship: Environmental Productivity and Income Level	p. 191
Results	p. 193
Productivity Analysis	p. 193
Market Productivity	p. 194
Joint Output Productivity	p. 194
Environmental Productivity	p. 195
Environmental Kuznets Curve Test	p. 196
Concluding Remarks	p. 200
Appendix: TEP of SO2 of Indian States	p. 200
A Global Analysis of Environmentally Sensitive Productivity Growth	p. 203
Introduction	p. 203
Measuring Environmentally Sensitive Productivity	p. 205
Directional Distance Functions	p. 207
Malmquist-Luenberger Productivity Index	p. 207
Computation of Directional Distance Function	p. 208
Data and Results	p. 209
Conventional Measurement of Productivity	p. 213
Environmentally Sensitive Measurement of Productivity	p. 215
Conclusions	p. 218
Macroeconomic Effects of Oil Price Shocks	p. 221
Introduction	p. 221
Oil Prices-Macroeconomy Relationship	p. 222
Channels Through Which Oil Price Shocks May Affect the Macroeconomy	p. 222
Oil Prices-Macroeconomy Relationship: Empirical Evidences	p. 223
Oil Price Data	p. 225
Measurement of Impact of Oil Prices on Macroeconomy	p. 229
Empirical Results	p. 232
Testing for Significance and Granger-Causality	p. 233
Macroeconomic Impacts of Oil Price Shocks	p. 234
Concluding Remarks	p. 242
Appendix	p. 242
Energy Prices and Induced Technological Progress	p. 245
Introduction	p. 245
Measurement of Technological Change	p. 247
The Econometric Estimation	p. 251
Data	p. 253
Long-Term Energy Prices	p. 254
Results	p. 254
Levels of Inefficiency in the Countries	p. 256
Technological Diffusion and Exogenous and Energy Price Induced Innovations	p. 257
Summary and Conclusions	p. 261
Appendix: Average Annual Values of Luenberger Productivity Indicators	p. 262
The Road Ahead	p. 265
Findings	p. 265
Climate Change Policy	p. 270
What to Do?	p. 273
Bibliography	p. 275
Index	p. 293
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