Economic growth invariably leads to environmental degradation. But in this paper it is shown that economic development may be necessary before a country will adopt a policy of environmental protection. Within the context of an optimal-policy model, this proposition is proved and an optimal policy is derived. It is shown that knowledge of preferences for environmental quality is necessary for such a policy of environmental protection. It is then shown how such preferences can be estimated from market demand. The estimation is carried out with select consumption data.
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