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Unit Roots, Polynomial Transformations and the Environmental Kuznets Curve

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  • Gang Liu
  • Terje Skjerpen
  • Anders Rygh Swensen
  • Kjetil Telle

    ()
    (Statistics Norway)

Abstract

Time-series regressions including non-linear transformations of an integrated variable are not uncommon in various fields of economics. In particular, within the Environmental Kuznets Curve (EKC) literature, where the effect on the environment of income levels is investigated, it is standard procedure to include a third order polynomial in the income variable. When the income variable is an I(1)-variable and this variable is also included nonlinearly in the regression relation, the properties of the estimators and standard inferential procedures are unknown. Surprisingly, such problems have received rather limited attention in applied work, and appear disregarded in the EKC literature. We investigate the properties of the estimators of long-run parameters using Monte-Carlo simulations. We find that the mean of the ordinary least squares estimates are very similar to the true values and that standard testing procedures based on normality behave rather well.

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Bibliographic Info

Paper provided by Research Department of Statistics Norway in its series Discussion Papers with number 443.

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Date of creation: Jan 2006
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Handle: RePEc:ssb:dispap:443

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Keywords: Emissions; Environmental Kuznets Curve; Unit Roots; Monte Carlo Simulations;

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References

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  1. William T. Harbaugh & Arik Levinson & David Molloy Wilson, 2002. "Reexamining The Empirical Evidence For An Environmental Kuznets Curve," The Review of Economics and Statistics, MIT Press, vol. 84(3), pages 541-551, August.
  2. Susmita Dasgupta & Benoit Laplante & Hua Wang & David Wheeler, 2002. "Confronting the Environmental Kuznets Curve," Journal of Economic Perspectives, American Economic Association, vol. 16(1), pages 147-168, Winter.
  3. Nilanjana Roy & G. Cornelis van Kooten, 2004. "Another Look at the Income Elasticity of Non-Point Source Air Pollutants: A Semiparametric Approach," Working Papers 2004-07, University of Victoria, Department of Economics, Resource Economics and Policy Analysis Research Group.
  4. 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.
  5. William A. Brock & M. Scott Taylor, 2004. "Economic Growth and the Environment: A Review of Theory and Empirics," NBER Working Papers 10854, National Bureau of Economic Research, Inc.
  6. Friedl, Birgit & Getzner, Michael, 2003. "Determinants of CO2 emissions in a small open economy," Ecological Economics, Elsevier, vol. 45(1), pages 133-148, April.
  7. Copeland,B.R. & Scott Taylor,M., 2003. "Trade, growth and the environment," Working papers 10, Wisconsin Madison - Social Systems.
  8. Bardsen, Gunnar, 1989. "Estimation of Long Run Coefficients in Error Correction Models," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 51(3), pages 345-50, August.
  9. David E. A. Giles & Carl Mosk, 2003. "Ruminant Eructation and a Long-Run Environmental Kuznets' Curve for Enteric Methane in New Zealand: Conventional and Fuzzy Regression Analysis," Econometrics Working Papers 0306, Department of Economics, University of Victoria.
  10. 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.
  11. Hannes Egli, 2004. "The environmental Kuznets curve : evidence from time series data for Germany," CER-ETH Economics working paper series 03/28, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  12. Daniel L. Millimet & John A. List & Thanasis Stengos, 2003. "The Environmental Kuznets Curve: Real Progress or Misspecified Models?," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 1038-1047, November.
  13. Dinda, Soumyananda, 2004. "Environmental Kuznets Curve Hypothesis: A Survey," Ecological Economics, Elsevier, vol. 49(4), pages 431-455, August.
  14. Luigi Ermini & Clive W.J. Granger, 1991. "Some Generalizations on the Algebra of I(1) Processes," Working Papers 199113, University of Hawaii at Manoa, Department of Economics.
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Cited by:
  1. Gang Liu, 2006. "A causality analysis on GDP and air emissions in Norway," Discussion Papers 447, Research Department of Statistics Norway.
  2. Silvia Coderoni & Roberto Esposti, 2014. "Is There a Long-Term Relationship Between Agricultural GHG Emissions and Productivity Growth? A Dynamic Panel Data Approach," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 58(2), pages 273-302, June.
  3. Coderoni, Silvia & Esposti, Roberto, 2011. "Long-Term Agricultural GHG Emissions and Economic Growth: The Agricultural Environmental Kuznets Curve across Italian Regions," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114426, European Association of Agricultural Economists.
  4. Silvia CODERONI & Roberto ESPOSTI, 2011. "Is there a Long-Term Relationship between Agricultural GHG Emissions and Productivity Growth? The Case of Italian Agriculture," Working Papers 369, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.

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