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Nonlinearity, Heterogeneity and Unobserved Effects in the CO2-income Relation for Advanced Countries

Author

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  • Mazzanti, Massimiliano
  • Musolesi, Antonio

Abstract

We study long run carbon emissions-income relationships for advanced countries grouped in policy relevant groups: North America and Oceania, South Europe, North Europe. By relying on recent advances on Generalized Additive Mixed Models (GAMMs) and adopting interaction models, we handle simultaneously three main econometric issues, named here as functional form bias, heterogeneity bias and omitted time related factors bias, which have been proved to be relevant but have been addressed separately in previous papers. The model incorporates nonlinear effects, eventually heterogeneous across countries, for both income and time. We also handle serial correlation by using autoregressive moving average (ARMA) processes. We find that country-specific time-related factors weight more than income in driving the northern EU Environmental Kuznets. Overall, the countries differ more on their carbon-time relation than on the carbon-income relation which is in almost all cases monotonic positive. Once serial correlation and (heterogeneous) time effects have been accounted for, only three Scandinavian countries - Denmark, Finland and Sweden - present some threshold effect on the CO2-development relation.

Suggested Citation

  • Mazzanti, Massimiliano & Musolesi, Antonio, 2013. "Nonlinearity, Heterogeneity and Unobserved Effects in the CO2-income Relation for Advanced Countries," Climate Change and Sustainable Development 162374, Fondazione Eni Enrico Mattei (FEEM).
    • Handle: RePEc:ags:feemcl:162374
    DOI: 10.22004/ag.econ.162374
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    Cited by:

    1. Marianna Gilli & Giovanni Marin & Massimiliano Mazzanti & Francesco Nicolli, 2017. "Sustainable development and industrial development: manufacturing environmental performance, technology and consumption/production perspectives," Journal of Environmental Economics and Policy, Taylor & Francis Journals, vol. 6(2), pages 183-203, April.
    2. Massimiliano Mazzanti, 2014. "Market and policy shocks in economic systems: interrelated dynamics in the sustainability transition," ECONOMICS AND POLICY OF ENERGY AND THE ENVIRONMENT, FrancoAngeli Editore, vol. 2014(2), pages 153-164.
    3. Tutulmaz, Onur, 2015. "Environmental Kuznets Curve time series application for Turkey: Why controversial results exist for similar models?," Renewable and Sustainable Energy Reviews, Elsevier, vol. 50(C), pages 73-81.
    4. Massimiliano Mazzanti, 2014. "Market and policy shocks in economic systems: interrelated dynamics towards future sustainability," SEEDS Working Papers 1214, SEEDS, Sustainability Environmental Economics and Dynamics Studies, revised May 2014.
    5. Muhammad, Shahbaz & Adebola Solarin, Solarin & Ozturk, Ilhan, 2016. "Environmental Kuznets curve hypothesis and the role of globalization in selected African countries," MPRA Paper 69859, University Library of Munich, Germany, revised 04 Mar 2016.
    6. Massimiliano Mazzanti & Ugo Rizzo, 2014. "Moving'diversely'towards'the'green'economy.'CO2'abating'techno organisational'trajectories'and'environmental'policy'in'EU'sectors," SEEDS Working Papers 0914, SEEDS, Sustainability Environmental Economics and Dynamics Studies, revised May 2014.

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    Keywords

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    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling

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