Vol. 1(2) SEP 2011 - SAVAP International

Academic Research International
ISSN: 2223-9553
Volume 1, Issue 2, September 2011
influence local and national governments to take action to improve the environment. This
leads to environmental legislation being enacted and new institutions designed to protect the
environment (for example, Arrow et al, 1995).
The EKC hypothesis
Another causal factor is the phenomenon of structural change in economies. The history of
industrialized countries is one of economic change from rural agricultural, to urban industrial
society, with increased environmental degradation ('dark satanic mills'). But subsequent
movement from an energy intensive industrial economy towards a less energy intensive
service based economy leads to a reduction in environmental degradation. Also, as a country
becomes more wealthy, it can afford to spend more on research and development, which
leads to the development of improved technologies and thus subsequent reduced
environmental impact (Canas, 2003; Dinda, ibid).
We shall see later that there are other causal factors.
A NOTE ON TERMINOLOGY
Readers of the EKC literature will find a number of technical terms being used. The
following notes on some of these terms will help those readers who are not familiar with
them.
Elasticity
'Elasticity', a much used term in economics, concerns the relationship between a dependent
and an independent variable. One reads statements of the form 'the a elasticity of b'. Here, 'a'
is the independent variable, 'b' the dependent variable. A common example in economics is
the price elasticity of demand . This concerns how demand for some product changes with
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