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A non-parametric decomposition of the environmental performance-income relationship: evidence from a non-linear model

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Abstract

This paper attempts to examine whether the environmental Kuznets curve (EKC) hypothesis is supported in MENA countries. We use, a novel RAM (range-adjusted measure)-based global Malmquist-Luenberger productivity index, accounting for slacks of inputs as well as desirable and undesirable outputs, to evaluate and decompose “green” productivity growth rates into technical change, pure efficiency change and scale change. By employing a panel smooth transition regression (PSTR) model, we investigate the income elasticity of environmental performance with respect to the decomposition factors. Our empirical results show that there are double thresholds when technical change and scale change are taken as transition variables, then leading to an inverted N-shaped curve between income and environmental performance. A single threshold is found when pure efficiency change is considered as a transition variable, yielding to an inverted U-shaped curve. Thus, our research does not find support for the EKC hypothesis.

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Notes

  1. Reviews on IDA can be found in Ang and Zhang (2000), Cansino et al. (2015) and on SDA in Hoekstra and Van den Bergh (2002), Miller and Blair (2009), and Su and Ang (2012).

  2. See González et al. (2005) for detailed description of the estimation method of PSTR model and the elimination of the fixed effect.

  3. We use the three tests \({LM}_{w}\), \({LM}_{F}\), and \(LRT\) concurrently in order to augment the reliability and consistency of the hypothesis testing procedures. Moreover, these three tests for nonlinearity were used for the first order Taylor approximation with one transition function and one location parameter. The procedure is not reported here due to space saving, but it is available upon request.

  4. European Bank for Reconstruction and Development.

  5. International Energy Agency.

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Ben Lahouel, B., Ben Zaied, Y., Yang, Gl. et al. A non-parametric decomposition of the environmental performance-income relationship: evidence from a non-linear model. Ann Oper Res 313, 525–558 (2022). https://doi.org/10.1007/s10479-021-04019-x

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