Interrelationships between income, health and the environment: Extending the environmental kuznets curve hypothesis

This paper examines the link between the health indicators and the environmental variables for a cross-section of countries widely dispersed on the economic development spectrum. While environment and income are seen to have an inverted-U shaped relationship (Environmental Kuznets Curve (EKC) hypothesis), it is also well established that environment and health are positively related. Our study focuses on the implications of this for the relationship between health and income. In the early phases of income growth, the gains in health and the losses in environmental quality could cancel each other out and this challenges the idea that as incomes increase health would always improve. To empirically analyse these issues, we estimate a two-stage least squares model that focuses on the impact of income and the environment on health status, with environment being an endogenous variable. Our results show that the environmental stress variable has a significant negative effect on health status. At the same time, gross national product (GNP) levels are shown to vary positively with health status variables. We find that the health gains obtained through improved incomes can be negated to a significant extent if the indirect effect of income acting via the environment is ignored. Research findings in this regard would be a useful policy instrument towards maximising both the environmental and health gains that come with economic growth and development.