A Dynamic Nonlinear Panel Decomposition Model for the Global Environmental Kuznets Curve

Cheyenne Amoroso, Carolina Garcia-Martos and Siem Jan Koopman
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Cheyenne Amoroso: Universidade da A Coruna
Carolina Garcia-Martos: Universidad Politecnica de Madrid
Siem Jan Koopman: Vrije Universiteit Amsterdam

No 26-057/III, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: We propose a decomposition of the Environmental Kuznets Curve (EKC) based on a differenceof-sigmoid functions with one for the economic-growth effect and one for the green-economy effect. This nonlinear function replaces the traditional quadratic specification in panel data models. We further extend the framework with unobserved stochastic trends to capture time-varying features such as evolving energy mixes and technological advances. The panel model can be represented in state-space form. We show that parameter estimation can be carried out by nonlinear regression and Kalman filter methods. In our empirical study, we consider a panel of pollution (CO2 emissions) and economic output variables for 15 major economies (G7, Australia and 7 emerging countries), representing approximately 75% of the global economy. We extract the common EKC where its parameters are pooled or partially pooled across all countries. The empirical results show statistically significant evidence of a global relevant EKC.

JEL-codes: C32 C33 F64 (search for similar items in EconPapers)
Date: 2026-08-18
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