New Evidence on Eastern Europe's Pollution Progress

Under communism, Eastern Europe's cities were significantly more polluted than their Western European counterparts. As ex-communist nations have made the transition to capitalism, these economies have experienced a composition shift in output. Manufacturing's share of employment is falling while the service sector's share of employment is rising. An unintended consequence of communism's decline is to improve urban environmental quality. This paper uses several new data sets to measure these gains. National level data are used to document the extent of convergence across nations in sulfur dioxide and carbon dioxide emissions. Based on a panel data set from the Czech Republic, Hungary and Poland, ambient sulfur dioxide levels have fallen both because of composition and technique effects. Air quality improvements are taking place at the same time that these economies are growing. This paper discusses the implications of this finding for testing the Environmental Kuznets Curve hypothesis. The incidence of this local public good improvement is also analyzed