There is general agreement that industrialization is an integral part of the economic growth process in developing countries and that it produce improvements in the welfare of economic agents, exactly as happened in Europe in the nineteenth century due to the Industrial Revolution (see, e.g., Lewis [24]; Ranis and Fei [31]; Bade [3]; Lucas [29]). However, an increasing number of contributions in literature deals with the negative impact on welfare of environmental pollution and depletion of free access-natural resources which, in some cases, accompany industrialization processes. L´opez [27] documented cases of structural changes triggered by the degradation of natural resources in Latin America and Sub-Saharan Africa. He introduced the term ‘perverse structural change’ to refer to structural changes of this type, which are characterized by a) environmental degradation and b) stagnant or declining wages of unskilled labor force in both farming and non farming sectors. The decline in the unskilled labor remuneration due to environmental degradation is documented by several works in literature (see, e.g., Bresciani and Vald´es [6]). Environmental degradation lowers the opportunity cost to work in non agricultural sectors and may fuel a development process of the type described in this paper. Other examples of structural changes catalyzed by environmental degradation have been observed in regions that have grown at high rates in recent years. In several small or medium size rural areas of Africa, China and India, environmental degradation is becoming a key issue and citizens are forced to change their behavior to defend themselves against the pollution effects of the industrialization process (see Economy [13]; World Bank [42]; Dhamodharam and Swaminathan [11]; Boopathi and Rameshkumar [5]; Deng and Yang [10]; Holdaway [22]; Chuhan-Pole et al. [8]). This is well described by the case study of Reddy and Behera [33], where the economic costs of water pollution due to industrial activity in the rural communities located in the industrial belts in Andhra Pradesh, South India, is evaluated. The cost estimates revealed that the impact of industrial pollution on rural communities is quite substantial in monetary terms1 , and is not compensated by the increase in the share of revenues deriving from the employment in industrial polluting sectors.