Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/72720
Authors: 
Hong, Seung Hyun
Wagner, Martin
Year of Publication: 
2008
Series/Report no.: 
Reihe Ökonomie / Economics Series, Institut für Höhere Studien (IHS) 224
Abstract: 
Recent years have seen a growing literature on the environmental Kuznets curve (EKC) that resorts in a large part to cointegration techniques. The EKC literature has failed to acknowledge that such regressions involve unit root nonstationary regressors and their integer powers (e.g. GDP and GDP squared), which behave differently from linear cointegrating regressions. Here we provide the necessary tools for EKC analysis by deriving estimation and testing theory for cointegrating equations including stationary regressors, deterministic regressors, unit root nonstationary regressors and their integer powers. We consider fully modified OLS estimation, specification tests based on augmented and auxiliary regressions, as well as a sub-sample KPSS type cointegration test. We present simulation results illustrating the performance of the estimators and tests. In the empirical application for CO2 and SO2 emissions for 19 early industrialized countries over the period 1870-2000 we find evidence for an EKC in roughly half of the countries.
Subjects: 
integrated process
nonlinear transformation
fully modified estimation
nonlinear cointegration analysis
environmental Kuznets curve
JEL: 
C12
C13
Q20
Document Type: 
Working Paper

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