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Between Estimates of the Environmental Kuznets Curve

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  • David I. Stern

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Abstract

Recent papers by Wagner in this journal and Vollebergh et al. in the Journal of Environmental Economics and Management point out some fundamental econometric problems with traditional methods of estimating the environmental Kuznets curve (EKC) and propose alternative approaches that avoid these issues. Wagner notes that traditional methods do not take into account the presence of powers of unit root variables and cross-sectional dependence in the data while Vollebergh et al point out that the time effects are not uniquely identified in the EKC model. The between estimator is a simple estimator that also addresses the concerns of these authors. It makes no a priori assumption about the nature of the time effects and is likely to provide consistent estimates of long-run relationships in real world data situations. I apply several common panel data estimators including the between estimator to the datasets for carbon and sulfur emissions in the OECD and global sulfur emissions. The between estimates of the sulfur-income elasticity are 0.732 in the OECD and 1.067 in the global data set and the estimated carbon-income elasticity is 1.612 in the OECD and 1.509 globally.

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Bibliographic Info

Paper provided by Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University in its series CAMA Working Papers with number 2010-04.

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Length: 30 pages
Date of creation: Feb 2010
Date of revision:
Handle: RePEc:een:camaaa:2010-04

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References

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  1. J. A. Hausman, 1976. "Specification Tests in Econometrics," Working papers 185, Massachusetts Institute of Technology (MIT), Department of Economics.
  2. Wagner, Martin, 2008. "The carbon Kuznets curve: A cloudy picture emitted by bad econometrics?," Resource and Energy Economics, Elsevier, vol. 30(3), pages 388-408, August.
  3. Pirotte, Alain, 1999. "Convergence of the static estimation toward the long run effects of dynamic panel data models," Economics Letters, Elsevier, vol. 63(2), pages 151-158, May.
  4. List, John A. & Gallet, Craig A., 1999. "The environmental Kuznets curve: does one size fit all?," Ecological Economics, Elsevier, vol. 31(3), pages 409-423, December.
  5. William R. Hauk & Romain Wacziarg, 2004. "A Monte Carlo Study of Growth Regressions," NBER Technical Working Papers 0296, National Bureau of Economic Research, Inc.
  6. David I. Stern, 2003. "The Rise and Fall of the Environmental Kuznets Curve," Rensselaer Working Papers in Economics 0302, Rensselaer Polytechnic Institute, Department of Economics.
  7. David I. Stern & Tony Auld & Michael S. Common & Kali K. Sanyal, 1998. "Is there an environmental Kuznets curve for sulfur?," Working Papers in Ecological Economics 9804, Australian National University, Centre for Resource and Environmental Studies, Ecological Economics Program.
  8. Perman, Roger & Stern, David I., 2003. "Evidence from panel unit root and cointegration tests that the Environmental Kuznets Curve does not exist," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 47(3), September.
  9. Herman R.J. Vollebergh & Bertrand Melenberg & Elbert Dijkgraaf, 2007. "Identifying Reduced-Form Relations with Panel Data," Tinbergen Institute Discussion Papers 07-072/3, Tinbergen Institute.
  10. Peter Egger & Michael Pfaffermayr, 2005. "Estimating Long and Short Run Effects in Static Panel Models," Econometric Reviews, Taylor & Francis Journals, vol. 23(3), pages 199-214.
  11. Jerry Hausman, 2001. "Mismeasured Variables in Econometric Analysis: Problems from the Right and Problems from the Left," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 57-67, Fall.
  12. David I. Stern, 2004. "Diffusion of Emissions Abating Technology," Rensselaer Working Papers in Economics 0420, Rensselaer Polytechnic Institute, Department of Economics.
  13. Baltagi, Badi H & Griffin, James M, 1984. "Short and Long Run Effects in Pooled Models," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(3), pages 631-45, October.
  14. David I. Stern, 2005. "The Effect of NAFTA on Energy and Environmental Efficiency in Mexico," Rensselaer Working Papers in Economics 0511, Rensselaer Polytechnic Institute, Department of Economics.
  15. Pesaran, M.H. & Smith, R., 1992. "Estimating Long-Run Relationships From Dynamic Heterogeneous Panels," Cambridge Working Papers in Economics 9215, Faculty of Economics, University of Cambridge.
  16. Peter Egger & Michael Pfaffermayr, 2002. "Long Run and Short Effects in Static Panel Models," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 B6-2, International Conferences on Panel Data.
  17. Martinez-Zarzoso, Inmaculada & Bengochea-Morancho, Aurelia, 2004. "Pooled mean group estimation of an environmental Kuznets curve for CO2," Economics Letters, Elsevier, vol. 82(1), pages 121-126, January.
  18. Vollebergh, Herman R.J. & Melenberg, Bertrand & Dijkgraaf, Elbert, 2009. "Identifying reduced-form relations with panel data: The case of pollution and income," Journal of Environmental Economics and Management, Elsevier, vol. 58(1), pages 27-42, July.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Two Paper Submissions this Week
    by David Stern in Stochastic Trend on 2009-12-11 06:56:00
  2. And then a Reject...
    by David Stern in Stochastic Trend on 2009-11-20 22:22:00
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Cited by:
  1. Michael Lamla, 2007. "Long-run Determinants of Pollution: A Robustness Analysis," KOF Working papers 07-164, KOF Swiss Economic Institute, ETH Zurich.
  2. Halkos, George, 2011. "Environment and economic development: determinants of an EKC hypothesis," MPRA Paper 33262, University Library of Munich, Germany.

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