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Taming the SO2 and NOx emissions: evidence from a SUR model for the US

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Abstract

We construct a Seemingly Unrelated Regression (SUR) model to investigate the link between local environmental pollution (sulfur dioxide-SO2 and nitrogen oxides-NOx emissions) and economic growth on a panel data set framework for the US over the period 1990–2012. The presence of different polynomials of GDP for each equation of SO2 and NOx respectively allows us to utilize a SUR model to estimate jointly the two equations in order to examine the total effect of environmental degradation. While we find evidence of a quartic relationship between SO2 emissions and economic development in a single equation framework this outcome does not seem to hold when we utilize a SUR model controlling for cross section dependence.

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Notes

  1. EKC hypothesis implies a non linear relationship of an inverted ‘U’ type between environmental degradation and economic growth.

  2. For a survey of the EKCs on an empirical and theoretical perspective see the relevant studies of Dinda (2004) and Kijima et al. (2010) respectively.

  3. It is worth mentioning that a polynomial regression raises some challenging technical issues that must be addressed (Wagner and Hong 2016).

  4. The CD tests were carried out in STATA using the “xtcd” and “xtcsd” routines, while we use two Breusch–Pagan LM tests. The first test allows for groupwise heteroskedasticity by using the command “xttest2” and the second is a Modified Wald test for groupwise heteroskedasticity in fixed effect regression model by using the command “xttest3”.

  5. The tests were carried out in STATA using the “xtwest” routine. It should be noted that the results are sensitive to the selection of the lag structure of the model. Persyn and Westerlund (2008) point out that this sensitivity might occur in small datasets.

  6. The degree of the polynomial for each equation has been determined by the maximum number of statistically significant powers. For example in the case of NOX third and higher degree polynomial specifications have the extra powers of GDP to be not statistically significant.

  7. However, the Wooldridge tests for first order autocorrelation denote that the errors display serial dependence.

  8. If b1 > 0, b2 < 0 and b3 > 0, then we come up with an N-shaped relationship or cubic polynomial (Kijima et al. 2010).

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Acknowledgements

The authors would like to thank the Editor-in-Chief Henrik Folmer for giving them the opportunity to revise their work. Special thanks also go to the fruitful comments and suggestions made by two anonymous reviewers of this journal that enhanced the merit of the paper. The authors also wish to express their gratitude to the Organizational Committee of the 4th Environmental Economics and Natural Resources Conference organised by the University of Thessaly, in Volos, Greece (November 4–5, 2016). Special acknowledgements should be given to Professor George Halkos and the participants of the conference for their fruitful comments and suggestions that enhance the merit of the paper. All remaining errors belong to the authors. The usual disclaimer applies.

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Authors and Affiliations

  1. University of Piraeus, Piraeus, Greece

    Michael Polemis

  2. University of Guelph, Guelph, ON, Canada

    Thanasis Stengos

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  1. Michael Polemis
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  2. Thanasis Stengos
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Correspondence to Michael Polemis.

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Polemis, M., Stengos, T. Taming the SO2 and NOx emissions: evidence from a SUR model for the US. Lett Spat Resour Sci 11, 95–104 (2018). https://doi.org/10.1007/s12076-018-0203-8

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