Evidence from panel unit root and cointegration tests that the Environmental Kuznets Curve does not exist

Perman, Roger; Stern, David I.

doi:10.1111/1467-8489.00216

Cited by 412 publications

(261 citation statements)

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“…They found no evidence of simultaneity. In any case simultaneity bias is less serious in models involving integrated variables than in the traditional stationary econometric model (Perman and Stern, 2003). Coondoo and Dinda (2002) test for Granger Causality between CO 2 emissions and income in various individual countries and regions.…”

Section: Econometric Critique Of the Ekcmentioning

confidence: 99%

The Rise and Fall of the Environmental Kuznets Curve

2004

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This paper chronicles the story of the environmental Kuznets curve (EKC). The EKC proposes that indicators of environmental degradation first rise, and then fall with increasing income per capita. However, recent evidence shows that developing countries are addressing environmental issues, sometimes adopting developed country standards with a short time lag and sometimes performing better than some wealthy countries, and that the EKC results have a very flimsy statistical foundation. A new generation of decomposition models can help disentangle the true relations between development and the environment.

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Section: Econometric Critique Of the Ekcmentioning

confidence: 99%

The Rise and Fall of the Environmental Kuznets Curve

2004

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“…Several authors, e.g. Perman and Stern (2003), nevertheless present unit root test results on log per capita GDP and its square. Furthermore, they even present 'cointegration' test results and estimates of the EKC.…”

Section: Unit Roots Cointegration and Nonlinear Transformations Of Imentioning

confidence: 99%

Exploring the environmental Kuznets hypothesis: Theoretical and econometric problems

Müller–Fürstenberger

Wagner

2007

Ecological Economics

153

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractFocussing on the prime example of CO 2 emissions, we discuss several important theoretical and econometric problems that arise when studying environmental Kuznets curves (EKCs).The dominant theoretical approach is given by integrated assessment modelling, which consists of economic models that are combined with environmental impactmodels. We critically evaluate the aggregation, model dynamics and calibration aspects and their implications for the validity of the results. We then turn to a discussion of several important econometric problems that go almost unnoticed in the literature. The most fundamental problems relate to nonlinear transformations of nonstationary regressors and, in a nonstationary panel context, to neglected cross-sectional dependence. We discuss the implications of these two major and some minor problems that arise in the econometric analysis of Kuznets curves. Our discussion shows that EKC modelling as performed to date is subject to major drawbacks at both the theoretical and the econometric level. KeywordsCarbon Kuznets curve, integrated assessment models, regressions with integrated variables, nonstationary panels JEL Classification Q20, C12, C13 CommentsWe gratefully appreciate the helpful comments of two anonymous reviewers and the editor, which have led to substantial improvements of the paper. Furthermore, the comments of Gregor Bäurle, Robert Kunst, Klaus Neusser, and Reto Tanner are gratefully acknowledged. We thank Benito Müller for providing the data used in this study and for discussions on the topic. The usual disclaimer applies.

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“…Lee and List (2004) show that their US per capita NO x emissions series for 1900-1994 is I(1). Perman and Stern (2003) perform both individual and panel unit root tests for SO 2 emissions and per capita GDP for 74 countries using 30 years of data. They conclude that both these variables are integrated in the majority of countries.…”

Section: E C O L O G I C a L E C O N O M I C S 5 9 ( 2 0 0 6 ) 4 1 9 mentioning

confidence: 99%

The income–environment relationship: Evidence from a binary response model

Verbeke

Clercq

2006

Ecological Economics

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The empirical environmental Kuznets curve (EKC) literature is vast but far from conclusive.Many authors have analysed the existence of an EKC for various pollutants. Others have used the EKC framework to identify country characteristics that help to explain the incomeenvironment relationship. In this framework environmental degradation is analysed using a second or third order polynomial in income and a limited number of control variables.Some authors question whether this standard framework is appropriate. This paper proposes an alternative to study the specific characteristics of countries that have experienced economic growth and an improving environment at the same time. We estimate a binary response model and find an EKC-like relation between the probability that a country's environment improves with economic growth and per capita GDP. Our evidence further suggests that the level of environmental damage is an important explanatory variable. We also confirm the importance of an open political system. These results indicate that the binary response model could be a valuable alternative to test which country specific characteristics are associated with a negative IER.

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Evidence from panel unit root and cointegration tests that the Environmental Kuznets Curve does not exist

Cited by 412 publications

References 50 publications

The Rise and Fall of the Environmental Kuznets Curve

The Rise and Fall of the Environmental Kuznets Curve

Exploring the environmental Kuznets hypothesis: Theoretical and econometric problems

The income–environment relationship: Evidence from a binary response model

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