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Between estimates of the emissions-income elasticity

  • Stern, David I.

Recent papers by Wagner and Vollebergh et al. 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 OECD and global carbon and sulfur emissions datasets. 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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Article provided by Elsevier in its journal Ecological Economics.

Volume (Year): 69 (2010)
Issue (Month): 11 (September)
Pages: 2173-2182

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Handle: RePEc:eee:ecolec:v:69:y:2010:i:11:p:2173-2182
Contact details of provider: Web page: http://www.elsevier.com/locate/ecolecon

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  1. William Hauk & Romain Wacziarg, 2009. "A Monte Carlo study of growth regressions," Journal of Economic Growth, Springer, vol. 14(2), pages 103-147, June.
  2. Wagner, Martin, 2006. "The Carbon Kuznets Curve. A Cloudy Picture Emitted by Bad Econometrics?," Economics Series 197, Institute for Advanced Studies.
  3. David I.Stern, 2010. "Modeling International Trends in Energy Efficiency and Carbon Emissions," Environmental Economics Research Hub Research Reports 1054, Environmental Economics Research Hub, Crawford School of Public Policy, The Australian National University.
  4. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 2007. "The Economic Consequences of Legal Origins," NBER Working Papers 13608, National Bureau of Economic Research, Inc.
  5. Stern, David I., 2004. "The Rise and Fall of the Environmental Kuznets Curve," World Development, Elsevier, vol. 32(8), pages 1419-1439, August.
  6. 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.
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  8. J. A. Hausman, 1976. "Specification Tests in Econometrics," Working papers 185, Massachusetts Institute of Technology (MIT), Department of Economics.
  9. Stern, David I. & Common, Michael S., 2001. "Is There an Environmental Kuznets Curve for Sulfur?," Journal of Environmental Economics and Management, Elsevier, vol. 41(2), pages 162-178, March.
  10. Hodrick, Robert J & Prescott, Edward C, 1997. "Postwar U.S. Business Cycles: An Empirical Investigation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(1), pages 1-16, February.
  11. Craig Gallet & John List, 1999. "The environmental Kuznets curve: does one size fit all," Natural Field Experiments 00527, The Field Experiments Website.
  12. 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.
  13. 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.
  14. 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.
  15. David I. Stern, 2004. "Diffusion of Emissions Abating Technology," Rensselaer Working Papers in Economics 0420, Rensselaer Polytechnic Institute, Department of Economics.
  16. 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.
  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. CARSON, RICHARd T. & JEON, YONGIL & McCUBBIN, DONALD R., 1997. "The relationship between air pollution emissions and income: US Data," Environment and Development Economics, Cambridge University Press, vol. 2(04), pages 433-450, November.
  19. 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.
  20. 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.
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