FRONTERA NORTENUM. ESPECIAL: POBREZA, 1994

Enviromental Degradation and Povertyin Less Industrialized Nations

Thomas J Kelly &Mwangi wa Githtnji-

There is empirical evidence that local environmental problems and low per capita income aregeographically correlated. Most of what is written about linkages between environmental degra-dation and poverty focuses on why the poor use their natural resources in an unsustainable manner.This paper emphasizes first the damage which environmental degradation does to the poor. Nextit reviews the standard environmental economics explanation for why the poor accept high levelsof pollution, and argues that some notion of power must be added to the standard analysis. Thenit examines the role of high discount rates, rapid population growth, incentive structures andinstitutions in the poverty-environment link. Finally, some general policy conclusions regardingpoverty and environmental degradation are drawn.

Existe evidencia de que los problemas ambientales y el ingreso bajo per clpita estan relacionadosgeogcificamente. La mayor parte de 10 que ha sido escrito respecto a los vinculos entre ladegradaci6n del medio ambiente y la pobreza se centran en descubrir por que los pobres utilizansus recursos naturales de manera insostenible. Este trabajo enfatiza principalmente el daiio que ladegradaci6n del medio ambiente provoca a los sectores pobres de la poblaci6n. Enseguida, elartfculo revisa la explicaci6n de la economfa ambiental estandar en cuanto a por que los pobresaceptan vivir con niveles altos de contaminaci6n, y argumenta que debe agregarse alguna noci6nde poder al anaIisis chlsico. Por otro lado, tambien examina el papel que juegan las altas tasas dedescuento, el crecimiento acelerado de la poblaci6n, las estructuras de incentivos e institucionesen el vinculo entre la pobreza y el medJo ambiente. Finalmente, se fonnulan algunas conclusiones encuanto a la pobreza y la degradaci6n ambiental.

'1bomas j. Kelly &Mwangi wa Gftbfnji. Both authors are doctoral students in the Department of Economics atthe University of California, Riverside, interested in issues of development and the environment. Se les puedeenviar correspondencia a: Department of Economics, Univertsity of California, Riverside, CA 92521, Tel.: (909)787-5037.

THERE is empirical evidence that povertyand environmental degradation are geo-graphically correlated.l The evidence indi-cates that rates of deforestation, soil ero-sion, water contamination, and airpollution tend to be higher in nations,regions, and localities with low per capitaincome. Most of what has been written onthis geographic coincidence has focusedon why the poor use natural resourcesunsustainably. In this paper we extend theanalysis to examine the two-way causalrelationship between poverty and environ-mental degradation. We begin by exami-ning the ways in which environmentaldegradation exacerbates poverty. In thesecond section we explore the theoreticalexplanations for why the poor suffer higherlevels of pollution in their immediate sur-roundings. In the third section we reviewthe most common explanations for unsus-tainable resource use, high rates of popu-lation growth and high discount rates, andthe additional explanatory factors of devel-opment strategy and institutional context.

ll. Effect of Environmental Degra-dation on the Poor

It is important to recognize that the poorare not only perpetrators of environmentaldamage, but are also among its most un-fortunate victims. Though the direct andindirect welfare losses associated with en-vironmental degradation are not reservedfor the poor alone, the poor suffer fromthem disproportionately. Environmentaldegradation worsens the plight of the poorprimarily through its adverse health effects

and by decreasing the productivity of theresources on which they rely.

Health Effects o!Environmental Degra-dationIn a World Bank study, Mink ranks themost important sources of health problemsfor the poor.2 These include water con-tamination, indoor air pollution, and out-door air pollution. The most important ofthese is contaminated water.3 In fact, theextent of water contamination in the ThirdWorld is so great that its effects are notreserved for the poor alone. This is not toimply that the wealthy and the poor sufferequally from this environmental problem.The anecdotal evidence that water and sani-tation quality are inferior in poor areas isconfirmed by a number of more systematicempirical studies which have shown a strongcorrelation between per capita income and

_C d' . 4access to :>alewater an sarutation.The primary sources of water contami-

nation are domestic sewage, industrialwaste, and agricultural runoff. The natureof the most prevalent water problem typi-cally depends on the stage of developmentof the economy. Predominantly agricul-tural economies with a rural base sufferprimarily from problems of biological con-tamination, with fecal waste causing thegreatest damage to health. Economies withgreater industrial activity and urban basedgrowth tend to suffer more from toxic andhazardous contamination of their water-ways.

The second most important source ofhealth problems is indoor air pollution.Indoor air pollution is both more prevalent

Alan Durning, "Poverty and the Environment: Reversing the Downward Spiral," Worldwatch Paper No. 92(1989); Stephen D. Mink, "Poverty, Population, and the Environment", World Bank Discussion Paper No. 189(Washington, D.C.: the World Bank, 1993);James A. Tobey, "The Impact of Domestic Environmental Policieson International Trade," Ph. D. dissertation, University of Maryland, 1989.Mink, ibid.Conference on the Social Dimensions of Environment and Sustainable Development (COSDESD), Develop-ment, Environment and People:Report oftbe Conference on tbe Social Dimensions of Environment and Sus-tainable Development (Geneva, 1992).See Mink, op. cit.

among the poor of LDCS and a greater riskto their health than outdoor air pollution.The primaI)' cause of indoor air pollutionis the burning of biomass fuels. These fuelsemit a great deal of smoke and, dependingon the particular fuel, may be toxic. Thehigh rate of respiratoI)' problems amongrural women in many cultures has beenblamed on the practice of cooking overbiomass fires.5

The practice of burning biomass fuelsvaries greatly by culture and climate, butone commonality is that they are burnedalmost exclusively by the poor. A study ofhouseholds in South Asia and Brazil hasshown that as income increases there is astrong tendency for households to switchfrom biomass fuels to cleaner-burningsources of energy such as kerosene, pro-pane, and electricity.6

The third most important source ofhealth problems is outdoor air pollution?Outdoor air pollution is caused mainly byindustrial manufacturing processes andautomobile use. Unlike water and indoorair pollution, exposure to outdoor air pol-lution does not tend to be restricted mainlyto the poor. Since air pollution drifts overlarge areas, a variety of income groups maybe effected.8 Nevertheless, the ability of thewealthy to engage in defensive activitiesmakes it extremely likely that the poor areexposed to more air pollution. Defensiveactivities like relocating to avoid pollution

or purchasing air filtersare costly and so aremore likely to be undertaken by the wealthy;the wealthy will tend to suffer less exposurebecause they can afford to opt out of it.

An additional consideration is the un-equal health effect a given amount of expo-sure will have for poor versus wealthy vic-tims. The effect on the poor is greater sincethey are more likely to work outdoors, exertthemselves physically in their labor, andbecause their generally inferior health statusmakes them more susceptible to respiratoI)'problems. Thus, although outdoor air pollu-tion drifts, the poor are sti11like1yto suffermore exposure and the exposure they sufferwill likely be more damaging.

Productivity Effects of EnvironmentalDegradation

In addition to the direct welfare effectsassociated with poor health, environ-mental degradation worsens povertythrou~h its effect on the productivity of thepoor. We can identify two distinct ways inwhich environmental degradation tends todiminish the productivity of the poor. Thefirst is the aforementioned effect on thehealth of the poor. Since unhealthy work-ers are less productive, the inferior envi-ronmental quality experienced by the poorimplies not only the direct welfare loss ofill health, but also an indirect welfare lossdue to the loss of productivity.

5 In Development, Environment and People:Report oftbe Conference on tbe Social Dimensions of Environmentand Sustainable Development (eosol!D,op. dt.) it is argued that while the poor bear the brunt of the effectsof environmental degradation, within poor households women suffer much more than men. Women are theprimary health care providers; they are the procurers of water and fuelwood; they have less opportunity tomigrate to escape environmental degradation; and in times of environmentally induced famines their caloricintake drops disproportionately.

6 Mink, op. dt.7 Sergio Margulis estimates that the annual costs of health damages from pollution in Mexico City alone ap-

proach U.S.$1.07 billion. This estimate includes only costs associated with medical treatment and producti-vity loss -- it ignores suffering which Margulis terms as "subjective pain" due to the extreme difficultyassociated with quantifyng it. See Margulis, "Back of the Envelope Estimates of Environmental Damage Costsin Mexico," Policy Research Working Paper No. 824 (Washington, D.C.: Latin America and the Caribbean Re-gional Office, The World Bank, 1992).

8 Most air quality studies have failed to demonstrates a clear-cut realtionship between income level and air pol-lution level (Mink, op. dt.). However, this failure is due in large part to limitations in the capability to mea-sure airborne contaminants and does not necessarily imply that no correlation exists.

9 Mink, op. cit.

The second is the decreased produc-tivity of degraded natural resources. Thereliance of the rural poor on the produc-tivity of natural resources is often verydirect. Their lack of man-made or humancapital means that decreased soil fertility,lOdeforested land, and polluted, overexploi-ted fisheries dramatically impair their abi-lity to produce enough to meet their basicneeds. This decrease in productivity im-plies that the poor will require more timeto reproduce their labor power. Becausethe poor often rely on the surrounding natu-ral environment for household needs, a de-graded, less productive ecosystem will re-quire greater labor inputs to yield theproducts necessary for survival. Kumar andHotchkiss carried out a study in Bangladeshin which they categorized different regionsinto severely or mildly deforested.ll Theirstudy showed that households located inseverely deforested regions needed an aver-age of one hour more each day to gatherfuelwood than otherwise similar householdslocated in mildlydeforested areas. In a regionof arute poverty the additional labor timedevoted to household tasks is likely to bediverted not from leisure time, but from otherproductive activities.

III.The Role of the Poor in Environ-mental Degradation. The Case ofPollution

In examining the role of the poor in envi-ronmental degradation we consider first

the case of pollution.12 In order to under-stand the role of the poor in the contami-nation of the environment, we must con-sider not only their role as polluters, butalso as victims of pollution. Environmentalquality tends to be bad in poor areas inpart because of actions of the poor (e.g.,burning biomass fuels), but more impor-tantly because of the actions of others, viz.,industrial pollutants are dumped on thepoor by manufacturers, and governmentsfail to provide sufficient water and sanita-tion infrastructure. Here we consider thestandard environmental economics theoryof optimal pollution levels as a possibleexplanation for the high levels of pollutionin poor areas. Specifically, we analyze whygroups ofpoor individualsmightaccept a highlevel of pollution in their environment. Nextwe consider how incorporation ofpower intothe optimal externality theory might explainwhy the poor are so unsuccessful inprotectingthemselves from the polluting actions orharmful neglect of others.

Standard environmental economicstreats pollution like any other externality. 13We know from microeconomic theory thatthe optimal level of any externality will bezero only in the special case for which themarginal external cost exceeds the mar-ginal benefit of externality production atall levels. Optimally, society will produceup to the point where the marginal netbenefit (MNB) from production just equalsthe marginal external cost (MEC). Thus,since externalities are typically generatedby productive activity, there is no reason

10 Margulis (op. cit.) estimates that annual productivity losses due to soil erosion in Mexico are approximatelyU.S.$l billion. Unfortunately, Margulis does not estimate losses separately for small and large landholders.Regardless, given the large amount of agricultural land owned by smallholders and the relatively high sus-ceptibility of these lands to erosion, it can be assumed that a significant share of these productivity losses areborne by the poor.

11 Shubh Kumar and David Hotchkiss, "Consequences of Deforestation for Women's Time Allocation, Agricul-tural Production, and Nutrition in Hill Areas of Nepal," IFPRP Research Report No. 69 (1988).

12 If one considers the assimilative capacity of the environment to be a natural resource and defmes pollutionas the production of waste in excess of the assimilative capacity, then the existence of pollution is not physi-cally distinct from other forms of environmental degradation. Nevertheless, environmental and natural re-source economists have found the distinction between pollution and other types of natural resourcedegradation analytically convenient, and we follow that convention here.

13 See, for example, David Pearce and R. Kerry Turner, Economics of Natural Resources and the Environment(Baltimore, Md.: John Hopkins University Press, 1990).

to believe that the optimal level of pollu-tion will be zero for any society. Therelevant question then is how much pollu-tion is optimal for society. Clearly this willdepend on the levels of MNB and MEC:higher MNB or lower MEC will increase theoptimal level of pollution, while lower MNBor higher MEC will decrease it.

Given this analytical structure it is easyto imagine why poor nations mig1:lthavehigher optimal levels of pollution.14 First,MEC is to some extent a function of thepreferences of the individuals who makeup society. Environmental quality is oftenconsidered to be a luxury good whosedemand decreases by a greater proportionthan income as income decreases. As such,the demand for environmental quality willtend to be low in societies where mostindividuals suffer from low income levels.In addition, since poverty is highly corre-lated with low levels of education, it maybe correlated with low levels of informa-tion on the harmful effects of pollution. Thislack of recognition of the damages pollutioncauses tends to decrease further the demandfor environmental quality and so lowers theMEC associated with pollution.

It may also be the case that the MNBassociated with pollution will be higher inpoor societies. In addition to the privateMNB enjoyed by the producers of the out-put which generates the externality, theremay exist some additional benefits whichaccrue to other members of society. In asociety with high levels of unemploy-ment/underemployment, the social bene-fits of the employment creation are likelyto be significant. The additional socialbenefits of productive activity in low in-

come areas tend to increase the optimallevel of pollution for poor nations. (SeeFigure B).

This theoretical result which suggestshigher optimal pollution levels in poorersocieties is supported by data on levels ofindustrially produced carbon dioxide. Us-ing correlation analysis to examine therelationship between per capita incomeand carbon dioxide emissions per dollar ofindustrial output, we found that there wasa Pearson Correlation coefficient of -0.268which was significantly different from zeroat the 5%significance leve1.15This indicatesthat a strong negative relation exists be-tween carbon dioxide emissions per dollarof industrial output and per capita nationalincome: because of lower MEC and/orhigher social MNB, LDCS are willing to to-lerate more carbon dioxide pollution perdollar of output.

In addition to a high level of tolerationfor their own pollution, some LDCSactuallyaccept the dumping of additional wastefrom developed nations within their bor-ders. From 1985 to 1989 Mexico, Haiti,Guinea, and Zimbabwe accepted wasteshipments from the United States, and newdumps for U.S. waste were planned forPanama, the Congo, Guatemala, SierraLeone, and the Bahamas.16 (US Congress,1989) Again, lower MEC and/or higher so-cial MNB lead LDCSto tolerate higher levelsof pollution than developed nations.

The Role of Power in Determining Pol-lution Levels

Consideration of why the optimal level ofpollution externality varies for different

14 Presumably a goverment's environmental pollcy (or lack theroO will be some reflection on the nation's tol-erance for pollution. Tobey (op. cit.) points out that by the mid-1970s most developed nations had institutedpollution control measures and had begun to enforce them actively. In contrast, by the mid-1970s few LDCShad adopted pollution control measures, and of the few who had policies in place, fewer still enforced them.In 1979, Walter and Ugelow (quoted in Tobey, op. cit. ) constructed an index for stringency of national en-vironmental controls and used it to regress environmental stringency and per capita income to have a cor-relation coefficient of .77.

15 The sample consisted of 101 countries and used 1989 data from World Resources 1992-1993 and the WorldDevelopment Indicators 1992 database, published by the World Bank.

16 U.S. Congress, "U.S.Waste Exports" (Washington, D.C.: U.S. Govemment Printing Office, 1989).

CostsBenefits

CostsBenefits

Q* ~Externality Level

A: The optimal level of externality will beat the externality level for which the mar-ginal external cost just equals the marginalnet benefit.

sodeties gives us some limited insight intowhy pollution might be worse in LDCs.However, it is not the case that LDCSwilltypically find themselves with relativelyheavy concentrations of pollution spreaduniformly throughout their territories,while developed nations suffer only rela-tively low levels of pollution spread evenlywithin their borders. Rather, within na-tions, regions, and localities there is greatinequality in the distribution of pollution,with the heaviest concentrations in areaswhere per capita income is lowest.

Consider the situation in which theproducer of some pollution and its victimsare members of two distinct groups withinthe same society. Our simple externalitytheory indicates that in the absence ofregulation (Le., when MEC are ignored), the

Q*w Qp*Externality Level

B: A lower marginal external cost for thepoor (MECp) andl or a lower marginal netbenefit for the wealthy will imply a higheroptimal level of externality production inpoor societies (Qp) than in wealthy ones(Q·w).

profit -- maximizing producer will generatepollution up to the point where the MNB isequal to zero (Q in Figure A). There are anumber of possible methods which sadetycould employ to move the production fromthe unregulated profit maximizing level tothe socially optimal level; Le. from ~ to Q*.The most obvious method is some sort ofCoasian bargaining arrangement betweenthe victims and beneficiaries of the pollu-tion. Depending on the relevant de factoproperty rights, either the victim could paythe polluter not to pollute, or the benefid-ary could pay the victim for the privilegeto pollute. However, the large number ofvictims associated with most forms of in-dustrial pollution would make the transac-tion costs of such a bargaining arrange-

ment too high for this solution to be viablein the real world.

Fortunately for the victims, a numberof more practical alternatives to the bar-gaining approach exist. The most com-monly suggested alternatives are regula-tory standards, emission or input taxes, andmarketable emission permits. It is theoreti-cally possible for any of these methods toachieve the socially optimal pollutionlevel. However, the imperfections inher-ent in any government intervention makeit unlikely that any of them will achieve theprecise socially optimal level of pollution.Instead, the most likely outcome will besome pollution level between the sociallyoptimal and unregulated profit maximizinglevels, Le. between Q* and~.

There is a familiar litany of caveats inth~ literature on the viability of these pol-lution control techniques: the limited avail-ability of information on environmentaldama~es, the danger of regulatory capture,the difficulty of measuring many types ofemissions, and many other problems mayexplain the failure of these methods toachieve the socially optimal pollutionlevel. However, an important practical con-sideration which has been neglected is theinequalityofpower which mayexistbetweenthe beneficiaryand victimof pollution.

In a slightly different context Boyce~ ~rgued that this inequality in powertrnplies that more pollution will be pro-duced than would be produced ifall agentswere equally powerful.17 Boyce accom-plishes this by defining a power-weighted·social decision rule and making the as-sumption that many environmental re-sources have ill-defined property rights.Boyce begins with the standard benefit-cost approach to evaluating whether aproject should be carried out. Projects arecarried out when

L,tb?O.

where bt is the net benefit to each indi-vidual in society. In order that his socialdecision rule more closely resemble whathe describes as the "de facto world ofsocial choice," Boyce adds the variable Ciwhich represents clout. In his power~weighted decision rule, projects are carriedout when

In order to demonstrate the impor-tance of the addition of clout we considera project for which all the economic bene-fits accrue to one group, while all thenegative external effects are suffered by asecond group. The benefits to winners arebw, where bw>o;and the benefits to thelosers are bl, where bl<O. Applying thepower-weighted social decision rule wehave net benefits of cwbw+ qbl, where Cwand q represent the clout of the winnersand losers. If the group benefiting from theproject enjoys more clout than those suf-fering the external effects, Le., if cw>q,more pollution will be produced than ifboth groups had equal power, Le., if cw·q.Similarly, if those suffering the externaleffects enjoy more power, Le., if Cw Cl, lesspollution will be produced than in anequitable society. Boyce argues that the neteffect of this inequality will be greaterproduction of pollution because the ill-de-fined property rights associated with manyenvironmental resources allow less scopefor Coasian-type bargaining to prevent theadditional pollution which results fromhaving more powerful winners.

Of more importance for our purposeis Boyce's assertion that clout is a functionof wealth. In our extension of his power-weighted social decision rule we also as-sume that clout increases with wealth·,thus, Ci • c(y,z) and ac(y,z)/()y > 0, wherey is wealth and z is a vector of non-wealthfactors. We extend the decision rule by

17 Jam~ Boyce,."Inequality, Inefficiency, and the Environment: A Power Theoretic Model," Department of Eco-nomlcs Working Paper 1993-7 (Amherst: University of Massachusetts, 1993).

assuming that the net benefits from anyproject are a function of the level of expo-sure to the negative externality. If we let 'A.represent the level of exposure to theexternality, then we have bi • b('A.), andb'('A.)< O.Thus we have net benefits equalto: Iq(Yi,z0biu..0.Projects which isolatenegative externalities where clout is lowwill tend to have a higher net benefit thanprojects which spread negative externali-ties among more powerful groups. Sincethose projects with the highest social netbenefit are most likely to be undertaken,and clout is a positive function of wealth,projects which concentrate exposure tonegative environmental externalities inpoor communities are more likely to beundertaken.

The Case of Natural Resource Degrada-tionMost of what has been written on the linksbetween environmental degradation andpoverty has focused on why the poorexploit their resources unsustainably. Themost common explanations are that thepoor have a high rate of population growthand a high discount rate. Here we examinethe validity of these explanations and sug-gest two additional explanatory factors, thechoice of development strategy and theinstitutional environment in which thepoor operate.

Rapid Population Growth and Envi-ronmental Degradation

Rapid population growth is frequentlyblamed for environmental degradation inLDCS.Because areas of rapid populationgrowth and rapid environmental degrada-tion often overlap, the conclusion is drawn

that rapid population growth must spur thedegradation of environmental resources.

This conclusion is not unreasonable.As mentioned above, the poor tend to relyquite directly on their surrounding naturalenvironment. An increase in the number ofpoor people implies an increased need forfood, construction materials, fuel, andother materials typically obtained from theenvironment. Ceterisparibus, an increasein the poor population will tend to exertstress on the ecosystem on which they rely.

While the above conclusion is notunreasonable, it is superficial in its charac-terization of the population-environmentlink. The interrelationship between popu-lation growth and the environment is quitecomplex. Rates of extraction depend notonly on population growth, but also on therelative prices of substitute! complementgoods, market integration, the effects ofculture on economic decisions, technologi-cal change, and the robustness of theecosystem.

In a response to the warnings by Ehr-lich and others that population growth willsoon overwhelm environmental re-sources,lB Griffin argues that a sharp in-crease in the relative price of scarce naturalresources will prevent the extreme case ofthe human population growing so large asto exceed the earth's carrying cagacity andso devastate the environment. Griffin'sargument rests on relative price changes,and so rightly shifts the argument overpopulation and environment away fromthe physical realm (of estimates of carryingcapacity, and inches of top soil lost) to theeconomic realm.

Griffin contends that environmentaldegradation is due not to populationgrowth, but to the misallocation of re-sources which results from the failure ofprices to reflect true social costs. Thisfailure stems in turn from missing markets,

1B PaulEhrlich,GretchenDaily,andLawrenceGoulder,"PopulationGrowth,EconomicGrowthandMarketEconomies,·Contention 1:2 (1991).

19 KeithGriffin,"A Commenton 'PopulationGrowth,EconomicGrowthandMarketEconomies',. ConJention2:1 (1992).

government failures, and market failure.The true source of environmental degrada-tion must then be these three shortcom-ings. If these three problems were cor-rected, population growth would notimply environmental degradation.

But alas, the three problems whichGriffin highlights are pervasive. Prices donot always adjust to reflect true social costsfor precisely the reasons he states: Asdemand increases for fuel-wood in Bang-ladesh, forests are Stripped bare, destroy-ing their ability to provide watershed pro-tection -- because of the missing market forwatersheds, prices do not reflect the totalvalue of the forest, and it is degraded.2O Inresponse to increasing food demand thegovernment of Indonesia instituted a planto increase rice production which providedfor subsidies on chemical inputs and forprice suppOrts.21 The overuse of fertilizersand herbicides caused environmentaldamage, as did the cultivation of pre-viously unprofitable lands in semi-arid re-gions -- ultimately government failure wasthe cause of the environmental degrada-tion.22 In Mexico increases in demand forfood have led to an increase in intensiveagriculture; specifically, the use of irriga-tion has increased, generating the exter-nalities of soil salinization and freshwatercontamination from agricultural runoff -the market failure associated with theseexternalities contributed to the environ-mental degradation.

While price imperfections are criticalin the population-degradation link, thereare other important factors as well. Wemust also consider the price response ofthe resource users. In many cases, naturalresources are the only productive re-

sources (besides their own labor) to whichpoor farmers have access. Thus, their de-mand for these resources tends to behighly price inelastic: even though the costof natural resource use soars with in-creased exploitation, the demand will de-crease very little. Consider a rural societywith a rapidly growing population and anon-increasing natural capital stock. In or-der to generate more food and income, theexploitation of the land will likely be in-tensified: fallow periods will decrease,overgrazing will occur, etc. Though awarethat overexploitation of the natural re-sources willbe costly in terms of decreasedfuture productivity, the growing popula-tion faces few and unattractive alternatives.There may be some opportunity for ruralto urban migration, but this will be limitedby the pace of economic growth in thecities. There may also be some chance forextension of the area under cultivation,butthis extension will tend to be onto pre-viously ignored marginal lands, which arerelatively unproductive and vulnerable toecological damage.

It is also the case that the response ofproducers to price signals is not always themost important determinant of their re-source use?3 Cultural and social factorsmay be more important than price signals.In many regions of Africa, the role oflivestock in a variety of cultural traditionsdoes much to determine the size of theherd. The need for cattle to fulfill thesecultural obligations often forces pastoral-ists to maintain herds larger than the profit-maximizing size. For example in the casesof bride wealth and male age group cere-monies, as the number of sons increases,so must the number of cattle, regardless of

20 Durning, op. cit.21 N. Vijay Jagannathan, "Poverty-Environment Linkages: Case Study of West Java," World Bank Environment

Department Divisional Paper No. 1990-8.22 In this context the term "government failure" might be somewhat misleading. The Indonesian government

actually succeeded in their professed goal of increasing rice production (Jagannathan, ibid.); but of course,the goals of governments are not always the same as the goals of economists.

23 Mwangi Glthmji and Charles Perrings, "Social and Ecological Sustainability in the Use of Biotic Resources inSub Saharan Africa," AMBIO 2-3 (May 1993).

the price signals or ecological danger. Un-fortunately for the environment, becauseHomo economicus is not an unculturedbrute, overgrazing may result as a directconsequence of population growth.

Thus, although it is not populationgrowth per se which threatens the environ-ment, in a world of highly imperfect priceadjustments and economic agents whoeither are not highly responsive to pricechanges or who respond to non-marketincentives, population growth is a proxi-mate (though not fundamentaO cause ofenvironmental degradation.24

Discount Rates and EnvironmentalDegradation

In explaining the relationship betweenpoverty and environmental degradationthe following story is often told: Poorpeople have high discount rates and sothey find it optimal to extract resources ata rapid rate, and they are unlikely to investin their resources. The logic behind thestory is that poor resource users have highdiscount rates because they have a highrate of time preference, and that the highrate of time preference is caused by theirpoverty. While this line of reasoning isinstructive as a heuristic device, it is bit tooneat. We observe neither high discountrates nor high rates of time preference.Rather, we observe economic behaviorwhich we believe is consistent with highdiscount rates, and we then infer that thehigh discount rates are caused by highrates of time preference. We also infer thatpoverty is the cause of this high rate of timepreference.

Though reasonable, these inferencesdo not tell the complete story. High dis-count rates may be caused by other factorsbesides the high rate of time preference.As we discuss later, the lack of a socialwelfare net may also induce behavior con-sistent with high discount rates. Further, itis not only absolute poverty which causeshigh rates of time preference. A person'stime preference is determined in part byhow he compares to his peers. A personwho has a low absolute level of income,but a high level of income relative to othermembers of his society, may not feel poorand may not have a high time preference.This relative aspect of poverty helps toexplain why indigenous people of theAmazon who are poor by absolute stand-ards may act in a manner consistent withlow discount rates, while migrants into theAmazon who may be materially better offact in a manner consistent with having highdiscount rates.

Development Strategy and Environ-mental Degradation

The effect of government policy on theincentives facing the poor is an importantdeterminant of natural resource use. Bothbroad macro policies, which we mightloosely call development strategies, andsector-specific policies and projects affectthe incentives that determine how naturalresources are used.

We begin with the case of develop-ment strategies. Different developmentstrategies will establish different incentivesfor natural resource use. A developmentstrategy which promotes industrial-ledgrowth creates employment opportunities

24 It Is also Important to note that the causality between population growth and environmental degradationmay also run In the other direction; that Is, environmental degradation creates incentives to increase familysize (cosom, op. cit). As the amount of labor time needed to complete basic household tasks Increases dueto environmental degradation, women may choose to have more children to help with the increasinglyar-duous tasks like fuelwood collection. The increased labor requirement may also lead to lower educationallevels for females, as young girls are required to work at home rather than attend school. As low levels ofeducation are highly correlated with high fertility, this could spur population growth. Finally, the degrada-tion of agricultural land worked by women wlll decrease their productivity, and so lower the opportunitycosts to their labor time devoted to child rearing.

which absorb rural labor and so tend todecrease direct pressure on natural capital.However, at the same time, industrialgrowth tends to increase demand for rawmaterials which, depending on the struc-ture of resource markets, may cause envi-ronmental degradation. If the policy alsoinvolves turning the terms of trade againstagriculture, two important changes in theincentives for resource use are likely. First,as the relative prices of agricultural goodsdecrease, the value of agricultural landtends to fall. As the value of land falls, sotoo does the cost to degrading it. Second,along with the decrease in income to agri-cultural producers, there is a multipliereffect for off-farm rural industries. Suchindustries tend to be labor intensive, andtheir decline means that the landless facefewer employment opportunities and sothere is greater pressure to exploit marginallands or mine natural resources from com-mon lands.25

Alternatively, a policy of promotingagricultural exports will imply some levelof integration into world commodity mar-kets. It is argued that much rural environ-mental degradation in Africa and LatinAmerica can be attributed to this policy ofagro-export development. 26 The policytends to change rural land use from locallyoriented, sustainable systems to agricul-tural enterprises designed to extract themaximum amount of surplus possible inthe short run. These agricultural enter-prises have tended toward extractive ratherthan sustainable resource use primarilybecause of the volatility of world commod-ity markets. The volatility of world com-modity markets generates uncertainty over

the long run profitability of export crops,and so the focus has been on maximizingthe short run profits while conditions arefavorable.

Specific sectoral policies and invest-ment projects also have an effect on re-source use. While this may seem abun-dantly obvious, it bears emphasiZingbecause the environmental effects may beentirely unanticipated or may be differentfrom what was expected.

]agannathan, et aI, argue that invest-ment in rural infrastructure which has theeffect of increasing spatial and market in-tegration may increase environmental deg-radation.27 Without opportunity to disposeof their surplus, rural populations havelittle incentive to exploit their natural re-sources beyond sustainable levels. But ifthey have access to wider markets foragricultural and forest products, and if theyhave access to consumer products whichmay be purchased only with cash,28 theywill have an incentive to increase resourceexploitation in order to extract a cashsurplus. Of course, this does not imply thatthere will necessarily be an incentive toexploit unsustainably, merely that mar-ket integration increases the tendencyto do SO.29

Institutions and Environmental Deg-radation

The most important institutional factorscontributing to environmental degradationin LDCSare the systems for common prop-erty management, security of tenure, andthe lack of a social safety net. Much of theenvironmental degradation in Africa and

25 Jagannathan Cop. cit.) emphasizes the importance of the labor absorption of rural industries. His figures in-dicate that in Indonesia 64 percent of the income of landless laborers comes from off-farm activities.

26 United Nations, ·Poverty Alleviation and Sustainable DeVelopment: Goals in Conflict?"Views and Recom-mendations of the Commitee for Development Planning CNewYork: United Nations, 1992).

27 N. Vijay]agannathan and A.O. Agunbiade, ·Poverty-Environment Linkages in Nigeria: Issues for Research,·World Bank Environment Department Divisional Working Paper No. 1990-7.

28 The increase in the perceived needs of the rural producers is a critical element in determining their rate ofresource exploitation.

29 It is Jagannathan and Agunbiade's Cop.cit.) contention that just such a phenomenon of environmental de-gradation following market integration has occurred in remote areas of Nigeria.

Asia has taken place on common lands.30

The poor have traditionally relied on com-mon areas for building materials, fuel-wood, and for food to supplement theirdiet. These common areas were not ownedby individuals, but by the entire group ofusers. However, despite the lack of privateownership, common lands were managedcarefully by the collective owners andwere exploited sustainably for generations.

The change from sustainable to extrac-tive use of the common areas began whencolonial rulers and newly independentgovernments interfered with and ulti-mately destroyed traditional resource man-agement regimes. Colonial governmentsinterfered with the traditional authoritystructures which controlled resource use,and newly independent governmentsoften nationalized common property re-sources, removing control to a centralauthority. The new management schemeswere typically unworkable. Because theywere stripped of the legal right to Ll).ecommon lands, resource users no longerhad the incentive to exploit the commonlands in a sustainable manner. Further, theusers did not respect the authority of thenew resource managers, and the distanceto governmental administrative centersand the expense of enforcement madeenforcement ineffective. Therefore re-source users could neither be excludedfrom resource use nor forced to exploit theresources sustainably.

A second important institutional factoris the distribution of landholdings and thesecurity of tenure. The presence of anenormous and growing number oflandlessagricultural workers in LDCS has contrib-uted greatly to environmental degradation.Prima facie it may seem somewhat disin-genuous to blame those without land forthe degradation of the land, but in fact thelandless are important degraders of com-

30 Durning, op. eit.31 ]agannathan, op. dt.; Durning, op. dt.32 Ibid.

mon areas (because they have no otherresources) and of fragile frontier land (be-cause they are forced to cultivateunfamil-iar marginal lands without knowledge ofthe relevant techniques for sustainable ex-ploitation). .

Many of the poor occupy land withoutsecure titles or with insecure tenure. Thispromotes unsustainable resource use be-cause when the poor have access to landwithout a long-run stake in it, they have anincentive to maximize short run gains atthe expense of long-run sustainability.Empirical studies of resource use havedemonstrated the strong relationship be-tween security of tenure and sustainableresource use. In a study of forest dwellersin Thailand which examined resource usepatterns of landowners, squatters withlong-term usufructuary rights, and squat-ters without usufructuary rights, a clearrelationship between security of tenureand sustainability of use was found.31 Thelandowners practiced the most sustainabletechniques and the squatters without rightspracticed the most extractive.

A third important institutional factor isthe lack of a reliable safety net for thepoor.32 An often overlooked dimension ofpoverty is the extreme vulnerability of thepoor to unforeseen expenses like illness,crop failure, or natural disaster. Risks arehigh and insurance markets are absent.When faced with such crises, the pooroften must sell off capital in order to paycurrent expenses, since they typically lacksavings and often do not have access toemergency assistance from the communityor government. Thus, when the only valu-able asset owned by the poor is naturalcapital, financial emergencies which ne-cessitate liquidation of their capital maywell imply environmental degradation.

This lack of a social security net alsoinfluences production strategies of poor

AGRICULTURISTS'0ECAUSETHEZCANNOTAFFORDTHERISKOFAFAILEDHARVEST%POORFARMERSAREMORELIKELZTOSELECTA PRODUCTMIYWHICHRESULTSINRELATIVELZSTABLEZIELDSTHANAPRODUCTMIYWITHMOREVARIABLEZIELDS%EVENIFTHERISKIERPRODUCTMIYPRODUCESAHIGHERINCOMEOVERTHELONGRUN'<HEEYIGENDESOFA SECURESEASONALINCOMETRAPTHEPOORFARMERSINAPOVERTZWHICH"FORREASONSWEHAVESEEN$THREATENSTHEENVIRONMENT'/FRICANPASTORALISTSOFTENRE]SPONDTOTHISLACKOFASOCIALSAFETZNETBZMAINTAININGSTOCKSIN ASSOCIATIVEOWNER]SHIPWHICHARESOLARGETHATTHEZDEGRADETHELAND',,<HIS PHENOMENONBECOMESEVENMOREACUTEINCASESWHERETHEPAS]TORALISTSHAVENOACCESSTOCREDITTOREBUILDHERDSAFTERANATURALCATASTROPHE'6NSUCHCASESTHEZAREFORCEDTORELZONNATURALREPRODUCTIONTOREBUILDTHEIRCAPITALSTOCK%ANDSOTHEREISANINCENTIVETOKEEPSTOCKSWHICHARELARGERTHANISECOLOGICALLZOPTI]MAL',-

?E HAVEEYAMINEDVARIOUSLINKSBETWEENENVIRONMENTALDEGRADATIONANDPOVERTZ'?E HAVESHOWNTHATENVIRONMENTALDEGRA]DATIONIS BOTHA CONTRIBUTINGFACTORTOPOVERTZANDARESULTOFPOVERTZ'8URANALZ]SISOFTHISTWOWAZCAUSALITZBETWEENPOV]ERTZANDENVIRONMENTALDEGRADATIONLEADS

'TOSOMEGENERALPOLICZCONCLUSIONS'4IRST%CONTRARZTOTHECOMMONASSUMPTIONTHATTHEREIS A NECESSARZTRADEOFFBETWEENECONOMICWELLBEINGANDENVIRONMENTALHEALTH%THEFACTTHATTHEPOORTENDTOBETHEPRINCIPALVICTIMSOFENVIRONMENTALDEGRA]DATIONSUGGESTSTHATACTIONSDESIGNEDTOENHANCEENVIRONMENTALQUALITZORPREVENTDEGRADATIONMAZACTUALLZIMPROVETHELOTOFTHEPOOR';ECOND%THEDESIGNOFANZPOVERTZALLEVIATIONPROGRAMWILLBENEFITFROMTHEINCLUSIONOFENVIRONMENTALFAC]TORS'<HIRD%THEVICIOUSCZCLEOFPOVERTZANDENVIRONMENTALDEGRADATIONREQUIRESTHATPOVERTZALLEVIATIONFORMANINTEGRALPARTOFANZECONOMICPROGRAMTOPROTECTTHEEN]VIRONMENT'4OURTH%ANZSHIFTOFPOWERTOTHEPOOR"BEITECONOMICORPOLITICAL$WILLTENDTODECREASETHECONCENTRATIONOFEN]VIRONMENTALDEGRADATIONINTHEIRCOMMU]NITIES'4IFTH%POPULATIONCONTROLPROGRAMSMAZHELPTOSLOWENVIRONMENTALDEGRADA]TION%BUTTHEZDONOTHINGTOADDRESSTHEUNDERLZING%FUNDAMENTALECONOMICPROB]LEMSDRIVINGTHEDEGRADATION';IYTH%BE]SIDESDIRECTPOVERTZALLEVIATION%POLICIESWHICHENSUREEFFECTIVELOCALCONTROLOFRESOURCESBZTHEPOORANDPROVIDEFORASOCIALSAFETZNETWILLBETHEMOSTEFFECTIVEINPROMOTINGSUSTAINABLERESOURCEUSEBZTHEPOOR'

,, 5ITHINJIAND9ERRINGS%OP' CIT',- 1HARLES9ERRIGS%a9ASTORAL;TRATEGIESIN;UB ;AHARAN/FRICA.<HE3CONOMICAND3COLOGICAL;USTAINABILITZOF

2RZLAND:ANGE7ANAGEMENT!":IVERSIDE.>NIVERSITZOF1ALIFORNIA%:IVERSIDE%(--)$% MMEO'