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The Environmental Kuznets Curve: some really disturbing Monte Carlo evidence

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Author Info
T. VERBEKE ()
M. DE CLERCQ ()

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Abstract

The Environmental Kuznets Curve hypothesis posits an inverse U- shaped relation between environmental pollution and income. The empirical literature has largely ignored the time series properties of the data used to test the EKC. This paper uses Monte Carlo experiments to analyse whether the order of integration influences the EKC empirical strategy. We show that if the variables used are I(1), the results will spuriously confirm the EKC hypothesis in 40% of the cases. Furthermore, accepting the EKC also influences the critical values for the rejection of no cointegration in the Engle- Granger framework.

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Publisher Info
Paper provided by Ghent University, Faculty of Economics and Business Administration in its series Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium with number 04/242.

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Length: 44 pages
Date of creation: Apr 2004
Date of revision:
Handle: RePEc:rug:rugwps:04/242

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Related research
Keywords: Environmental Kuznets Curve Hypothesis; I(1); cointegration; monte carlo;

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Find related papers by JEL classification:
Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions

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References listed on IDEAS
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  1. Douglas Holtz-Eakin & Thomas M. Selden, 1992. "Stoking the Fires? Co2 Emissions and Economic Growth," NBER Working Papers 4248, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  2. Junsoo Lee & John List, 2004. "Examining Trends of Criteria Air Pollutants: Are the Effects of Governmental Intervention Transitory?," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 29(1), pages 21-37, September. [Downloadable!] (restricted)
  3. William Harbaugh & Arik Levinson & David Wilson, 2000. "Reexamining the Empirical Evidence for an Environmental Kuznets Curve," NBER Working Papers 7711, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Roger Perman & David I. Stern, 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 and Blackwell Publishing Asia Pty Ltd., vol. 47(3), pages 325-347, 09. [Downloadable!] (restricted)
  5. Grossman, Gene M & Krueger, Alan B, 1995. "Economic Growth and the Environment," The Quarterly Journal of Economics, MIT Press, vol. 110(2), pages 353-77, May. [Downloadable!] (restricted)
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  6. Shafik, Nemat, 1994. "Economic Development and Environmental Quality: An Econometric Analysis," Oxford Economic Papers, Oxford University Press, vol. 46(0), pages 757-73, Supplemen. [Downloadable!] (restricted)
  7. Selden Thomas M. & Song Daqing, 1994. "Environmental Quality and Development: Is There a Kuznets Curve for Air Pollution Emissions?," Journal of Environmental Economics and Management, Elsevier, vol. 27(2), pages 147-162, September. [Downloadable!] (restricted)
  8. James MacKinnon, 1990. "Critical Values for Cointegration Tests," University of California at San Diego, Economics Working Paper Series 90-4, Department of Economics, UC San Diego. [Downloadable!]
  9. 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. [Downloadable!]
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  10. Stern , David I., 1998. "Progress on the environmental Kuznets curve?," Environment and Development Economics, Cambridge University Press, vol. 3(02), pages 173-196, May. [Downloadable!]
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