Answer to Question #277364 in Microeconomics for Saif

Question

1. The Superfund program uses strict liability and joint and several liability with respect to clean up costs. Explain why this system of liability is likely to result in the underreporting of toxic waste disposal sites. (25 points)

2. Summarize what is meant by the pollution haven hypothesis. Why might it be difficult to prove the existence of this theory? (10 points)

3. Empirical evidence does not consistently support the environmental Kuznets curve. What does this suggest about the tradeoff between economic growth and environmental degradation? (5 points)

Answer 1

1. The Superfund statute (formally known as the National Environmental policy Response, Compensation, and Liability Act, or CERCLA) holds parties liable for the presence of hazardous substances at a site, in whole or in part.
2. When large industrialised countries seek to establish factories or headquarters abroad, the pollution refuge hypothesis states that they will frequently choose for the cheapest choice in terms of resources and labor that also provides the land and materials access they require. This, however, frequently comes at the expense of environmentally harmful behaviors.
3. Grossman and Krueger (1991, 1995) discovered an inverted-U relationship between various pollutants and GDP per capita, supporting the premise that productivity recovery was a necessary prerequisite for implementing environmental regulations to reduce the impact of economic growth on the environment. (EKC). The Environmental Kuznets Curve (EKC) hypothesis explains why economic development and environmental degradation have an inverted U-shaped connection.