How Economic Growth Affects Emissions. An Investigation of the Environmental Kuznets Curve

University essay from Lunds universitet/Nationalekonomiska institutionen

Abstract: The Environmental Kuznets Curve (EKC) describes an inverted U-shaped relationship between per capita income and environmental degradation. In this paper this relationship will be analysed by using per capita GDP as proxy for per capita income, and per capita carbon dioxide and sulphur dioxide as representatives for environmental degradation. Using cross-country time series data for ten global countries characterised by different levels of development, I find that there is evidence for an inverted U-shaped EKC. However, there are also other curvatures that explain the relationship between economic growth and emissions. The results suggest that in particular linear functions might explain this relationship. As linear functions might be considered as part of (inverted) U-shaped functions the theory of the EKC is not completely rejected by the finding of linear functions. Altogether, the empirical results do not indicate particular differences between developing and developed countries. The most striking differences appear between carbon dioxide and sulphur dioxide. In the case of carbon dioxide, both positive linear functions and inverted U-shaped functions seem to explain the relationship between economic growth and emissions. In the case of sulphur dioxide, negative linear functions seem to explain that relationship.

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