Environmental Damage and its Impacts on Inequality and Poverty: Applications to Brazil and Costa Rica

Abstract

Accounting for environmental damage is relevant to how one measures the extent and severity of inequality and poverty, and the question of ecological distribution - how the costs associated with environmental damage are distributed across the population - is critical. Following Khan’s (1997) study on Bangladesh, I use environmental damage estimates to adjust inequality and poverty measures for Brazil and Costa Rica. Unlike Khan, I test for different assumptions regarding the ecological distribution. Provisional results indicate that inequality and poverty are understated, and that, under certain assumptions, both worsened in Costa Rica during the 1980s, contrary to what conventional statistics suggest. Want of reliable ecological distribution data, however, suggests that sensitivity analysis around competing assumptions may be preferable to conventional indicators.