Determinants of Poverty and Pollution : An Application of a Model of Simultaneous Equations Units in Brazil

Background: This article offers empirical evidence regarding one of the oldest controversies in the economics literature: interfaces between income level and the environment. In spite of the significant debate about possible causal relations among income, pollution and environmental degradation, it has been dominated by oversimplifications of the complex realities involved. They allege, at one extreme, that accelerated population growth is the cause of poverty which is seen as cause of environmental degradation. At the other extreme, the concentration of wealth in the hands of a small percentage of the population is alleged to be the cause of an immense demand of natural resources. Such simplifications have survived for many years because of the scarcity of empirical work testing those hypotheses. Objective: The present empirical research was designed to test the relationship among income levels, poverty, inequality and environmental degradation. Multiple linear regression analysis models were used to handle the data gathered from secondary Brazilian sources. Results: In spite of most of the robust results obtained, there is persistent evidence of a considerable conceptual hiatus to be overcome if any robust understanding is to be achieved regarding the correlations that exist among income level, income distribution and the use of natural capital by society. Conclusion: Poverty may be both a cause and a consequence of high level of environmental degradation just as income distribution inequality may lead to the coexistence of both degradation and conservation of natural capital