Structural Change, Environment and Well-Being: Interactions Between Production and Consumption Choices of the Rich and the Poor in Developing Countries

81 Pages Posted: 25 Jun 2008

See all articles by Angelo Antoci

Angelo Antoci

University of Sassari

Paolo Russu

Università degli Studi di Sassari

Elisa Ticci

University of Florence

Date Written: June 25, 2008

Abstract

Vulnerability to scarcity or to reduction of natural capital depends on defensive substitution possibilities that, in turn, are affected by the availability of other productive factors. However, in several developing countries asset distribution tends to be highly skewed. Taking into account these elements, this paper argues that environmental degradation may represent a push factor of economic development in an economy polarized into two main classes (the Rich and the Poor) and characterized by the following stylized facts: a) the main income source of the rural poor is self-employment in traditional activities highly depending on natural resources; b) labor remuneration in rural sector represents the basic opportunity cost for (unskilled) labor in the economy. Thus, given that environmental degradation reduces labor productivity of the rural poor, it may depress wages; c) production of the modern sector managed by the rich is less affected by depletion of natural resources because they can adopt defensive strategies that the poor cannot. They are able to defend themselves by partially substituting natural resources with physical capital accumulation and wage labor employment. We will show that, in this context, environmental depletion may benefit the modern sector through an increase in low cost labor supply and, in turn, it may stimulate economic transition. However the structural change is likely to result in an increase in inequality.

Keywords: Production, Consumption Choices, Welfare

JEL Classification: D62, O11, O13, O15, O41, Q20

Suggested Citation

Antoci, Angelo and Russu, Paolo and Ticci, Elisa, Structural Change, Environment and Well-Being: Interactions Between Production and Consumption Choices of the Rich and the Poor in Developing Countries (June 25, 2008). FEEM Working Paper No. 48.2008, Available at SSRN: https://ssrn.com/abstract=1151504 or http://dx.doi.org/10.2139/ssrn.1151504

Angelo Antoci (Contact Author)

University of Sassari ( email )

Piazza Universita
Sassari, 07100
Italy

Paolo Russu

Università degli Studi di Sassari ( email )

Piazza Universita
Sassari, 07100
Italy

Elisa Ticci

University of Florence ( email )

Piazza di San Marco, 4
Florence, 50121
Italy

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