Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/130454
Authors: 
Sen, Suphi
Melenberg, Bertrand
Vollebergh, Herman R. J.
Year of Publication: 
2016
Series/Report no.: 
CESifo Working Paper 5837
Abstract: 
We propose an estimation strategy that accounts for two major problems raised in the empirical literature testing for the prevalence of the inverted U-shaped relation between environmental degradation and economic activity, namely the Environmental Kuznets Curve (EKC) hypothesis. First, we use pairwise differencing to properly identify the income effect, and to make use of estimators that likely suffer less from heterogeneity, cross-sectional dependence, and other common factor problems. Second, we apply nonlinear-nonstationary parametric and non-parametric estimation techniques to estimate the pairwise differenced regressions, since panel unit root tests indicate that our income and emission series are integrated of order one. Our results for regional CO2 emissions systematically yield positive income effects while the estimated time effects do not compensate for these income effects sufficiently to generate an inverted U-shape for CO2 emissions.
Subjects: 
CO2 emissions
unit roots
nonlinearity
nonparametric estimation
JEL: 
C22
C33
O50
Q50
Document Type: 
Working Paper

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