Abstract
We perform an updated literature survey on pollution-growth nexus via the environmental Kuznets curve (EKC) hypothesis, both from theoretical and empirical standpoints. First, we conduct a literature review on the most well-known rationale behind the EKC prevalence and discuss the key components of the research design when estimating the EKC. Second, we bring together the most influential empirical papers published in the last decade, which focus on EKC estimation in developing and transition economies. Overall, succeeding to curtail some of the deficiencies suggested by theoretical contributions, the recent empirical studies might indicate a certain consensus regarding pollution-growth nexus, and EKC validity. On one hand, reinforcing the EKC nature, several studies reveal a long-run relationship between indicators. On the other hand, according to income coefficients’ signs, the traditional bell-shaped pattern seems to be at work for some developing and transition economies. However, in some cases, the estimated turning point lies outside the income sample range, calling into question not only the true pattern between pollution and growth but also the identification of EKC. Taken collectively, both the theoretical foundations and empirical evidence, could contribute to a better understanding of the pollution-growth nexus in the EKC context, and suggest some useful insights into the future works on the subject as well as the crucial policy implications in this group of countries.
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Notes
In this paper, the term ''developing'' refers to both developing and emerging economies.
It is worth mentioning that we do not argue that this type of analysis should be performed instead of a parametric one, or provide better results at the advantage of fewer assumptions.
We take China as an example since a large number of studies considered focus on testing EKC for this country, compared to other states. However, a comparison could be made for the other states as well. Besides, we look for an overall behavior independent of the period analyzed, pollution indicator, and empirical methodology.
Also, the parametric quadratic function implies symmetry since, at both sides of the threshold, the pollution increases and decrease by the same rate.
We discuss here some of the recent developments of panel data techniques, as panels include both N and T dimensions, and the EKC is usually tested using panel data models. Still, it is worth mentioning that the advanced in the time-series econometric tools are more or less similar.
= number of molecules of the gas per million (106) molecules of dry air.
We exclude Japan and the US from our analysis, considering that they belong to the group of developed countries. However, we keep the EU(28) and include the World as they also comprise the developing and transition countries.
Due to data availability for the EU(28), the Russian Federation, and at the global level, the period covered is 1990-2016. Also, in the empirical analysis, we use the natural logarithm of the data.
We present the nonparametric regression models solely in a descriptive way, to better visualize and disentangle the pollution-growth nexus patterns. As such, we do not concern ourselves with variable nonstationary, cointegration, and other technical aspects related to time-series econometrics, these being beyond the aim of the present study. However, we note that some of those aspects are discussed during the paper theoretically.
We note that the review of the literature is not exhaustive, as we include studies published between 2010 and 2019 in popular journals on the subject, which meet the needs of the present work.
The studies that embody both types of analysis are included in the section in which we consider that the primary analysis harmonize.
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Acknowledgements
I am indebted to the Editor (Shunsuke Managi), three anonymous referees, and Dorina Lazăr and Alexandru Minea for very constructive comments and suggestions that improved the manuscript significantly. I also gratefully acknowledge the support from the French Embassy and the French Institute in Romania. All remaining errors are mine. Usual disclaimers apply.
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Purcel, AA. New insights into the environmental Kuznets curve hypothesis in developing and transition economies: a literature survey . Environ Econ Policy Stud 22, 585–631 (2020). https://doi.org/10.1007/s10018-020-00272-9
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DOI: https://doi.org/10.1007/s10018-020-00272-9