Arik Levinson, James O'Brien, 11 March 2015

Rich countries pollute less partly because people in richer countries consume a less pollution-intensive bundle of goods. This column investigates whether this results from consumer preferences or economy-wide changes. Within a country, the environmental Engel curve is concave – meaning that richer households, while polluting more, consume a less pollution-intensive bundle. Over time, this accounts for half of the decrease in rich household pollution, with the remainder being due to price changes and environmental regulations.

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