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Regime Switching and the Shape of the


  • Nektarios Aslanidis

    (Department of Economics, University of Crete, Greece)

  • Anastasios Xepapadeas

    () (Department of Economics, University of Crete, Greece)


We explore the idea of regime switching as a new methodological approach in the analysis of the emission - income relationship. We formalize the idea by using a simple static model of profit maximization where above a threshold income level a more stringent environmental policy induces a decreasing emission-income relationship. At the empirical level we estimate such a regime switching model and we find an inverse-V-shaped emission - income relationship. .Our findings are in line with the original papers in this literature. We estimate thresholds which can be viewed as turning points, and which occur at reasonable values.

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  • Nektarios Aslanidis & Anastasios Xepapadeas, "undated". "Regime Switching and the Shape of the," Working Papers 0206, University of Crete, Department of Economics, revised 31 Mar 2003.
  • Handle: RePEc:crt:wpaper:0206

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    References listed on IDEAS

    1. Hansen, Bruce E., 1999. "Threshold effects in non-dynamic panels: Estimation, testing, and inference," Journal of Econometrics, Elsevier, vol. 93(2), pages 345-368, December.
    2. Terasvirta, T & Anderson, H M, 1992. "Characterizing Nonlinearities in Business Cycles Using Smooth Transition Autoregressive Models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 7(S), pages 119-136, Suppl. De.
    3. John, A & Pecchenino, R, 1994. "An Overlapping Generations Model of Growth and the Environment," Economic Journal, Royal Economic Society, vol. 104(427), pages 1393-1410, November.
    4. Gene M. Grossman & Alan B. Krueger, 1995. "Economic Growth and the Environment," The Quarterly Journal of Economics, Oxford University Press, vol. 110(2), pages 353-377.
    5. Hirtle, Beverly, 2009. "Credit derivatives and bank credit supply," Journal of Financial Intermediation, Elsevier, vol. 18(2), pages 125-150, April.
    6. 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.
    7. Arik Levinson, 2001. "The Ups and Downs of the Environmental Kuznets Curve," Working Papers gueconwpa~01-01-08, Georgetown University, Department of Economics.
    8. Larry E. Jones & Rodolfo E. Manuelli, 2001. "Endogenous Policy Choice: The Case of Pollution and Growth," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 4(2), pages 369-405, July.
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    Cited by:

    1. Sebri, Maamar, 2009. "La Zone Méditerranéenne Face à la Pollution de L’air : Une Investigation Econométrique," Miscellaneous Papers 112751, Agecon Search.
    2. Verbeke, Tom & De Clercq, Marc, 2006. "The income-environment relationship: Evidence from a binary response model," Ecological Economics, Elsevier, vol. 59(4), pages 419-428, October.

    More about this item


    Environmental Kuznets Curve; environmental policy;

    JEL classification:

    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation


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