The Kuznets curve and the environmental Kuznets curve: a simple steady-state analysis

The literature on the Kuznets curve and that on the environ- mental Kuznets curve share several features. The analogy between the two curves concerns not only their shape, but also the theo- retical explanations underlying them and the methodology used in the empirical studies. Although the evidence in favor of the curves is not clear-cut, both relationships are the object of a long-lasting debate in the literature for their large policy implications. This work intends to contribute to such debate by investigating what might happen in equilibrium if we assume that both relationships apply. In particular, taking the two curves as stylized facts of the economy, this paper examines possible implications of these em- pirical regularities on the steady state equilibrium of the economy. Using a very simple in nite horizon representative agent model, we show that three possible outcomes can occur: no steady state, a unique steady state, and multiple steady states. When a steady state does exist, stability analysis suggests that inequality across countries may tend to increase.