Regime Switching and the Shape of the
Nektarios Aslanidis () and
Anastasios Xepapadeas ()
No 206, Working Papers from University of Crete, Department of Economics
We explore the idea of regime switching as a new methodological approach in the analysis of the emission - income relationship. We formalize the idea by using a simple static model of profit maximization where above a threshold income level a more stringent environmental policy induces a decreasing emission-income relationship. At the empirical level we estimate such a regime switching model and we find an inverse-V-shaped emission - income relationship. .Our findings are in line with the original papers in this literature. We estimate thresholds which can be viewed as turning points, and which occur at reasonable values.
Keywords: Environmental Kuznets Curve; environmental policy (search for similar items in EconPapers)
JEL-codes: C2 O1 Q2 (search for similar items in EconPapers)
Pages: 15 pages
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