GTAP Resources: Resource Display
| GTAP Resource #1098 |
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"Economic Development, Trade and Environmental Quality: Environmental Kuznets Curve Hypothesis in a Threshold Model." by Alpay, Savas Abstract The proposed inverted U-type relationship between environmental degradation and per capita income (known as EKC hypothesis) has been re-examined in this paper. Previous studies on EKC hypothesis are criticised due to their assumption of the quadratic or cubic specification of pollution with respect to income per capita; it is unclear why the specific reduced-form equation employed in their estimations exists. An important contribution of our study is to overcome this problem by employing the threshold estimation method developed by Hansen (1996, 2000), which can directly and rigorously test EKC. We find no evidence for EKC hypothesis between pollution and income; increases in income reduce the load on the environment, but they do not lead to improvement in environmental quality. Most importantly, for the first time in the literature we take openness to trade as the threshold variable, rather than GDP per capita, and test for an EKC-type behavior. Our results present a weak support for the hypothesis that higher openness lead to improved environmental conditions. Key Words: Economic Development, Environmental Kuznets Curve, Openness to Trade, Threshold Model |
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Last Modified: 9/15/2023 2:05:45 PM
