Three essays on development economics and environmental economics

This thesis consists of three independent essays on the fields of development economics and environmental economics. The first two papers use the same theoretical model to explain different issues in developing countries. The third paper studies the effects of population growth on the Environmental Kuznets Curve provided it exists. China's internal migration plays an important role in explaining its recent economic success. The first paper constructs a model of labor migration, focusing on the role of selection effects in determining labor market outcomes, and then calibrates it to quantify the effects of China's labor market reforms on its outputs and inequality. I show that the removal of internal migration restrictions benefits the economy as a whole, while exacerbating inequality within both rural and urban areas. The second paper suggests that minimum wage policy may be beneficial for a transitional economy in which labor is migrating from rural areas to urban areas when positive moving costs occur. With a moving cost wedge a modestly binding minimum wage can cause relatively low productivity urban workers to be replaced by higher productivity rural migrants, and therefore increase aggregate output. To achieve the second best outcome, government shall fully compensate the moving costs for the marginal migrant workers who move from the rural industrial sector to the urban subsistence sector and a binding minimum wage shall be imposed on the urban workers but not the migrant workers in the urban industrial sector. The Environmental Kuznets Curve (EKC) hypothesis postulates an inverted U-shaped relationship between economic growth and many local environ mental health indicators. By using an overlapping generations (OLG) model, I focus on technological effects, where the properties of the existing pollution abatement technologies could generate the inverted U-shaped EKC and other forms of growth-pollution paths for the less advanced economies. Moreover, I examine the effects of population growth on the shape of the EKC, provided that it exists. Simulations indicate positive population growth raises the height of the EKC at every level of output per worker; thus, putting an extra burden on environment quality. Empirical evidence from China partially supports the results.