Economic Development and Environmental Quality: Evidence from Taiwan

Abstract

The relationship between economic growth and environmental quality is identified for Taiwan. The question is investigated by using a set of pooling data on per‐capita income and selected major environmental quality variables as well as an aggregated environmental quality indicator constructed by a hedonic price approach. The results have indicated that different environmental indicators portray different portions of an inversed U‐curve relating pollution and income. As with the aggregate environmental indicator, an index used to generalize the overall trend and account for the general perception of environmental quality, gives a relationship between the indicator and economic growth which is said to be compatible in foreseeable income levels. The positive relationship between economic development and environmental quality, however, does not imply that a greater percentage of income, inferred from monetary measure of aggregate environmental index, would be spent on the improvement of environment as income increased.