THE SOCIAL DIMENSION OF ENVIRONMENT AND SUSTAINABLE DEVELOPMENT

THE SOCIAL DIMENSION OF ENVIRONMENT
AND SUSTAINABLE DEVELOPMENT



by


Anil Markandya

and

Bruce Rhodes



CSERGE Working Paper GEC 92-15

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THE SOCIAL DIMENSION OF ENVIRONMENT
AND SUSTAINABLE DEVELOPMENT



by


Anil Markandya

and

Bruce Rhodes


The Centre for Social and Economic Research
on the Global Environment
University College London
and
University of East Anglia








Acknowledgements

The Centre for Social and Economic Research on the Global Environment (CSERGE) is a
designated research centre of the Economic and Social Research Council (ESRC).

This paper was originally read to a conference organised by the UN Research Institute for
Social Development, Geneva, 1992.

ISSN 0967-8875

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Abstract

Although systematic data are hard to come by,, there are important links between urban air
and industrial pollution and different socio-economic groups. Urban pollution as an issue for
the poor is growing in magnitude as cities expand and the percentage of poor inhabitants
increases. The paper also looks at who benefits from the generation of urban pollution and
the micro and macro policy responses from governments.

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1.
INTRODUCTION

This paper examines the linkages between urban pollution, especially air pollution, and the
socio-economic status of the affected groups in developing countries. Although a substantial
literature has emerged in recent years on urban pollution problems and their impacts on
welfare (mainly health), the question of which groups are affected, which groups are
responsible for the damages, and how policy to mitigate the effects of urban pollution will
impinge on different groups have hardly been touched on.

In this paper an attempt is made to provide a framework for looking at these questions, and
to survey what empirical evidence is available There are, broadly, three areas of interest.
First, we would like to know who is affected by the damage to the ambient environment, and
to what extent different groups are affected. Second, the linkage between poverty, or low
incomes, and environment degradation is of concern. Is it the poor who are responsible for
the damage; or is it mainly a result of consumption by the rich? This leads naturally to the
third area, which is that of policy; that is, how would the policies that are proposed for
controlling pollution affect different groups? These question are not of mere academic
interest. The design of policy should be influenced by socio-economic considerations, both
from an efficiency point of view (a policy that hits the poor and weak sections of society may
not work); and from an ethical perspective (such a policy is socially unjust).

The paper is structured as follows. In Section 2 we look at the evidence on urban industrial
and air pollution in developing countries. Not surprisingly, one finds that in most respects the
poorer sections of society suffer more as a result of he environmental damage. However, it
is legitimate to ask whether they suffer more in respect of pollution that other items that
generate human welfare, and to ask whether the indicators of welfare applied to some of
these pollution variables should be the same as that applied to consumer goods. This
section also looks at the relative impacts of pollution and health indicators in rural and urban
areas. Section 3 examines the evidence on the reverse causal link between socio-economic
status and environmental damage; that is which group cause the environmental damage?
This is not an easy question to answer because the economic activities which generate the
damage involve, by definition, complex interrelationships between groups of individuals.
Hence even if the pollution is being generated by a factory owned by a wealthy set of
individuals, the ‘benefits’ of producing the pollution are being shared by all workers and
consumers of that factory. Disentangling these effects requires careful economic analysis of

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a kind that has not been attempted in any developing countries.1Nevertheless, by a process
of looking at the evidence in a piecemeal fashion one can draw certain conclusions. This is
done in Section 3. Section 4 looks at the policies that have been attempted or are being
proposed to combat industrial pollution in developing countries, and asks how they affect the
lower in come groups and the disadvantaged. Such policies can be classified as
microeconomic and macroeconomic. Under the former there are the command and control
policies, and market-based policies, including the use of pollution charges and subsidies.
Under the macroeconomic policies we have changes in tax rates in general, the role of
industrial policy; and the expected influence of economic growth on the urban environment.
Finally, Section 5 concludes the paper with a number of reflections and an urgent research
agenda for the future. The importance of the latter cannot be overstressed; good policy
needs data and information and no amount of hypothesising can overcome gaps in this field.

1 For an example of such an analysis in developed countries, see Dorfman and Dorfman, Economics of the
Environment: Selected Readings, W.W Norton and Company, USA, 1972.

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2.
INDUSTRIAL AND AIR POLLUTION IN DEVELOPING COUNTRIES

2.1
A theoretical framework
It would be scarcely credible if anyone were to come up with the conclusion that pollution
‘hurts’ the rich more than the poor. The wealthy in all societies have access to a range of
entitlements that make it possible for them to take avertive action to avoid the more
unpleasant aspects of urban living. This has always been true, from the time when the noise
from horse carriages was mitigated in wealthy neighbourhoods by laying down straw, and
when the rich bought bottled water to avoid the hazards of what was to be found in local
wells and rivers. In developed countries today, the picture is similar, and models of
environmental damage use this feature to estimate the damage done by air pollution. Such
models, which exploit the fact that property located in less damaging environments is more
costly (and therefore occupied by better off individuals) are called hedonic models and have
shown the ‘benefits’ attached to improvements in air quality or reductions in noise, or
reductions in risk from land contamination2. Similar studies have not been carried to any
extent in developing countries, although some initial attempts are being made now in
countries with serious air pollution problems.

A proper analysis of the impacts of pollution by socio-economic characteristics could be
carried out, by plotting a measure of household status (e.g. per capita income) against
environmental damage measured in physical or monetary terms. The latter are shown in
Figures 1 and 2 and as expected physical damage (Figure 1) is greater on lower income
groups. Evidence for this is proposed below. Whether monetary damage is greater or less
on the disadvantaged depends on how fast the value of a unit of damage declines relative to
income, or whatever measure of socio-economic status is used (Figure 2). It might seem
unreasonable for a unit of damage to have a ‘higher value’ if it afflicts the wealthy, but that is
the consequence of the valuation system that most societies operate under for all its
allocation decision, and not just the ones related to the environment. One reason, however,
why one might want to operate under a different valuation system for air and industrial
pollution is that the primary concern here is health and although most societies believe that
some inequality in consumer goods is acceptable, they are less willing to accept that as a
premise for primary health indicators, such as mortality from involuntarily experienced
pollutants and toxic materials3. Hence for certain forms of pollution, society may take the

2 For details of studies see Markandya and Pearce (1989).
3 We emphasis involuntary here because variations in voluntary health risks are frequently accepted as being
permissible. For example, workers are paid more in certain occupations simply because they face a greater risk
of injury or death. As long as the risk is voluntarily undertaken, it is considered at least partly acceptable.

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view that the value curve is irrelevant and what matters is the physical damage curve, which,
ideally, should be flat, with equal risk for all groups.

Figure 1:

Physical measure

of pollution










Socio-economic Status
(e.g. income)

Figure 2:


Monetary measure of
pollution


value effect dominates physical effect





physical effect dominates value effect



Socio-economic Status

(e.g. income)
In most analyses of the socio-economic impacts of goods and services, it is considered
desirable to look at the relative impacts as well as the absolute relationships shown in
Figures 1 and 2. The former are shown in Figures 3 and 4, where it is the damage relative to
income that is being measured. Again, this can be done in physical or monetary terms
(Figures 3 and 4 respectively). A monetary relationship such as given in Figure 4 would

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indicate a regressive impact if the damage per unit of income were rising as incomes rose
and a progressive impact if the damage per unit of income were falling as incomes rose.

Figure 3:

Physical measure / income


progressive impact


neutral impact




regressive impact



Socio-economic Status
(e.g. income)

Figure 4:

Monetary measure / income


progressive impact


neutral impact



regressive impact



Socio-economic Status

(e.g. income)



In developed countries, when individuals have a choice about the levels of pollution that they
face, we can say that the shape of the curves will depend on the income elasticity of demand
for the environmental quality in question. If the elasticity is greater than one then, as incomes
increase, people will spend more than proportionately to reduce the damage they suffer and

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the curve in Figure 4 will be downward sloping. If the elasticity is one it will be flat and it is
less than one it will be upward sloping. In all cases, however, the wealthier individuals will be
buying themselves out of the environmental pollution.

For most of the problems that developing countries fact we do not have systematic data to
show us the extent to which the better off buy themselves out of the environmental problems
by a combination of where they live ad the use of protective measures such as vaccinations,
timely medical treatment, etc. Such evidence as there is (see below) seems to indicate that
the poorer groups suffer much more than the wealthier groups. However, whether it is
disproportionate to their relative incomes is difficult to say. Some evidence in this would be
useful as It would indicate if environmental pollution impacts are adding to the overall
inequality of society or reducing it. Some evidence that is available is reviewed in the section
below.

2.2
Empirical evidence on the urban-environment linkages
2.2.1 Urbanisation and the urban economy
What key features emerge about urban and industrial pollution? To begin with we note that
the affected groups are growing at a very rapid rate. Urban population growth in developing
country cities is largely unplanned and faster than the rural rate of growth. Furthermore,
although some of the urban population growth rates are expected to level off, the projections
are for ever-increasing city sizes. United Nations forecasts suggest that the urban population
in developing countries will increase from 37% to 61% of the total population in developing
countries over the period 1990-2025. Urban residents will live in large agglomerates of 5
million people or more. In 1990 there were 33 cities of this size in the world and 22 of them
were located in developing countries. By the year 2000 the two largest cities will by: Mexico,
with a population of some 30 million; and Sao Paulo, with 27 million4. Table 1, below, gives
some data for selected cities for the period 1950 to 2000.

As the cities have expanded, macroeconomic problems of declining activity have resulted in
urban poverty and ‘unemployment’ increasing pari passu. A recent study by the ILO found
that the urban unemployment rate increased from about 10% in the 1970s to about 30% in
the 1980s. According to the World Bank, in 1988 some 330 million people, or about a quarter
of the total urban population lived in poverty. Thus the Bank predicts that “urban poverty will
become the most significant and politically explosive problem in the next century”5.

4 UNEP Global Environment Monitoring System: assessment of urban air quality, WHO and UNEP, 1991.
5 The World Bank: Urban policy and economic development, p.19 (1988). Many of the so-called unemployed are

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Table 1:
Populations living in cities of 1 million or more

1950
1980
2000
%
%
%
(106)
(106)
(106)
Africa
3.5
1.6
36.5
7.9
154.6
19.0
Latin America
15.3
99.7
101.3
27.3
232.2
37.5
East Asia
31.1
4.6
131.9
12.1
261.5
19.1
South Asia
17.9
2.6
105.9
7.4
328.2
14.5
Source: Repetto (1985)

Most of the urban poor live on the urban fringe where land values are lower and where
exposure to environmental hazards is particularly severe. Some operate on open land which
does not belong to them. Such low value land tends to be vulnerable to environmental
disasters, including fire, flooding and landslides. Moreover, the activities of the informal
sector workers (who dominate the economy in these areas) themselves include those that
are polluting – e.g. emitting chemical and other toxic substances; or unsafe – e.g. the
preparation and selling of food in the streets that is hazardous to health. Due to the limited
access to open land, the informal sector tends to concentrate in and around squatter and
slum locations which can lead to overcrowding. The crowding per se is not an environmental
problem, except that there is rarely sufficient infrastructure such as drinking water, waste
disposal, sewage treatment, communications and roads. The urban poor inevitably find
themselves living in over crowded shanty towns on steep slopes, near rubbish dumps or
industrial zones .They suffer health problems due to air, water and noise pollution,
insufficient sanitary facilities, inadequate liquid and solid waste disposal systems, land
erosion and traffic congestion.

2.2.2 Air pollution in the urban environment
There are three major sources of air pollution in urban areas:
• Industrial point sources: includes all industrial sources and power plants;
• Mobile sources: includes cars, buses, motorcycles, trucks, etc.;
• Domestic sources: includes home heating and cooking.


in reality partly employed in the informal sector. Studies conducted by the ILO suggest that between a quarter
and three quarters of the urban employment, especially in the large cities, is taken up by this sector. Informal
activities include informal transport and housing construction, as well as manufacturing and the provision of
various services, ranging from vehicle repairs and shoe shine boys to vendors selling agricultural and non-
agricultural goods.

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