Economic Growth and the Environment: A Household Perspective from Cooking Fuel Choices and Indoor Air Pollution

Yabei Zhang, University of Maryland
Reeve Vanneman, University of Maryland

This paper examines the relationship between economic growth and the environment from a household perspective through fuel-use decisions. Because household fuel choices directly influence the level of indoor air quality that can be treated as a private good, studying household fuel-use decisions allows us to empirically assess the effect of economic growth on the environment in certain cases such as an open economy with perfect environmental policies. This study has two major differences from the previous similar studies. First, in terms of the theoretical model, instead of using a simple static model, we adopt a dynamic optimization model in an open economy setting. Second, in terms of empirical analysis, instead of using indirect air quality measurements, we use household data from India with directly measured indoor air quality. In contrast to previous findings of inverted-U relationship between pollution and income, we find that pollution levels decrease monotonically as income increases.