Economic growth and environment nexus: environmental Kuznets curve

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2015
Özokcu, Selin
Carbon dioxide (CO2) is one of the most important Green House Gases (GHGs) for contributing to global climate change. Human influence on earth through economic development is clearly emitting immense amount of CO2 emissions. Hence, examining the relationship between CO2 emissions and economic growth is crucial. In this study, the relationship between income and CO2 emissions in the context of the Environmental Kuznets Curve (hereafter EKC), which posits the existence of an inverted U-shape relationship between environmental degradation and economic development, is empirically investigated. For this purpose, three empirical models are examined. For all models, the relationship between per capita income and per capita CO2 emissions and the relationship among per capita income, per capita energy use, and per capita CO2 emissions are analyzed respectively for the period of 1980 – 2010, using the panel data estimation techniques, then Driscoll-Kraay Standard Errors is applied. Yet, for the first model, data are analyzed for 26 OECD countries with high income levels, while for the second model; data are examined for 52 emerging countries. Lastly, third model is formed for 88 countries according to data availability. The results of three models show that all analyses give U-shape relationship for quadratic functional form, while both N-shape and an inverted N-shape relationship for cubic functional form are observed. To sum up, the results of our panel data analysis do not support the EKC hypothesis. That is, environmental degradation cannot be solved automatically by economic growth.

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Citation Formats
S. Özokcu, “Economic growth and environment nexus: environmental Kuznets curve,” M.S. - Master of Science, Middle East Technical University, 2015.