4.5 Article

Estimating country-specific environmental Kuznets curves from panel data: a Bayesian shrinkage approach

Journal

APPLIED ECONOMICS
Volume 46, Issue 13, Pages 1449-1464

Publisher

ROUTLEDGE JOURNALS, TAYLOR & FRANCIS LTD
DOI: 10.1080/00036846.2013.875111

Keywords

environmental Kuznets curve; Bayesian shrinkage estimator; heterogeneity; O13; O44; Q56

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Designing an efficient global climate policy turns out to be a difficult yet crucial task since there are noteworthy cross-country differences in energy and carbon intensities. In this article, the environmental Kuznets curve (EKC) hypothesis is tested for carbon dioxide (CO2) emissions, and as a modelling technique, the iterative Bayesian shrinkage procedure is employed to handle the cross-country differences. The results suggest that first the EKC hypothesis is rejected for 47 out of the 51 countries considered when the heterogeneity in countries' energy efficiencies and cross-country differences in the CO2 emissions trajectories are accounted for; second, a classification of the results with respect to the development levels of the countries concerned reveals that the emergence of an overall inverted U-shaped curve is due to the fact that in high-income countries increase in gross domestic product (GDP) decreases emissions, while in low-income countries emissions and GDP are positively correlated.

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