(E3 ) Working Papers Series
E3 Working Paper WP-026 Abstract
WP-026: Haimanti Bhattacharya and Robert Innes, "Income and the Environment in Rural India: Is There a Poverty Trap?" (October 2011) Full Paper
We study the relationships between rural income distributions and changes in environmental conditions in South, West, and Central India. The analysis distinguishes between poverty, average incomes, and "richness," and considers two satellite-based measures of environmental health, one an index of biomass and the other an index of forestation. Other than the relatively very rich, we find that all income groups benefit from an improved environment and intermediate income households benefit more than the poor in absolute terms. Higher average incomes and "richness" are estimated to increase environmental decline, but we do not find a significant impact of income poverty on forestation. The results generally contradict the "poverty trap" conjecture, with environmental degradation driving income reductions that promote offsetting afforestation (which benefits the poor).