Cross-country estimations of the Environmental Kuznets Curve (EKC) to empirically
analyze the relationship between income and pollution have generally
assumed a common structure for all countries. Since this latter feature is not
supported by economic theory, this paper uses the Random Coefficient Model
proposed by Swamy (1970) and empirically estimates EKCs for sulfur dioxide
with specific turning points from a sample of 73 high and low income countries.
A crucial aspect is that there are large differences between the estimated turning
points of the EKCs for the different countries in the sample, which points to
the relevance of using the approach employed here since assuming a common
structure for all countries erroneously hides this relevant empirical feature.
Moreover, the analysis of the structure of the EKCs estimated suggests that
regulatory processes resembling market mechanisms could induce the empirical
emergence of EKCs. Finally, taking into consideration the most recent concerns
in the literature, we econometrically checked, on the one hand, for the validity of
the usual theoretical assumption of exogeneity of the per capita income variable
in the EKC relationship and, on the other hand, for an eventual structural change
causing the sign change in the pollution-per capita income relationship of the
EKC. The weak exogeneity and the structural break tests employed rendered
plausible that income per capita is really the driver variable determining the
EKC relationship found.
Environmental Kuznets Curve, random coefficients, panel unit roots, weak exogeneity, structural break
Figueroa, E. (2016). COUNTRY-SPECIFIC ENVIRONMENTAL KUZNETS CURVES: A RANDOM COEFFICIENT APPROACH APPLIED TO HIGH-INCOME COUNTRIES. Estudios De Economía, 36(1), pp. 5–32. Retrieved from https://estudiosdeeconomia.uchile.cl/index.php/EDE/article/view/40218