The Environmental Kuznets Curve: A Semiparametric Approach with Cross-Sectional Dependence

Alexandra Soberon and Irene D’Hers
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Alexandra Soberon: Department of Economics, University of Cantabria, Avda. de los Castros 56, 39005 Santander, Spain
Irene D’Hers: Department of Economics, University of Cantabria, Avda. de los Castros 56, 39005 Santander, Spain

JRFM, 2020, vol. 13, issue 11, 1-23

Abstract: This paper proposes a new approach to examine the relationship between CO 2 emissions and economic developing. In particular, we propose to test the Environmental Kuznets Curve (EKC) hypothesis for a panel of 24 OECD countries and 32 non-OECD countries by developing a more flexible estimation technique which enables to account for functional form misspecification, cross-sectional dependence, and heterogeneous relationships among variables, simultaneously. We propose a new nonparametric estimator that extends the well-known Common Correlated Effect (CCE) approach from a fully parametric framework to a semiparametric panel data model. Our results corroborates that the nature and validity of the income–pollution relationship based on the EKC hypothesis depends on the model assumptions about the functional form specification. For all the countries analyzed, the proposed semiparametric estimator leads to non-monotonically increasing or decreasing relationships for CO 2 emissions, depending on the level of economic development of the country.

Keywords: environmental Kuznets curve; CO 2 emissions; cross-sectional dependence; semi-parametric regression; panel data (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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