Skip to main content
×
×
Home

Modeling the emissions–income relationship using long-run growth rates

  • David I. Stern (a1), Reyer Gerlagh (a2) and Paul J. Burke (a3)
Abstract
Abstract

The authors adopt a new approach to modeling the relationship between emissions and income using long-run per capita growth rates. This approach allows them to test multiple hypotheses about the drivers of per capita emissions in a single framework and avoid several of the econometric issues that have plagued the environmental Kuznets curve literature. They estimate models for carbon and sulfur dioxide emissions. They can reject restricted models that omit either growth or beta convergence effects. Although the term representing the environmental Kuznets effect is statistically significant for per capita carbon and sulfur dioxide emissions, the estimated income per capita turning points are out of the sample for the full data set.

Copyright
References
Hide All
Aldy J.E. (2006), ‘Per capita carbon dioxide emissions: convergence or divergence?’, Environmental and Resource Economics 33(4): 533555.
Angrist J.D. and Pischke J.-S. (2010), ‘The credibility revolution in empirical economics: how better research design is taking the con out of econometrics’, Journal of Economic Perspectives 24(2): 330.
Anjum Z., Burke P.J., Gerlagh R., and Stern D.I. (2014), ‘Modeling the emissions–income relationship using long-run growth rates’, CCEP Working Paper No. 1403, Centre for Climate and Economic Policy, Australian National University, Canberra.
Azomahou T., Laisney F., and Nguyen-Van P. (2006), ‘Economic development and CO2 emissions: a nonparametric panel approach’, Journal of Public Economics 90(6–7): 13471363.
Barro R.J. (2015), ‘Convergence and modernisation’, Economic Journal 125(585): 911942.
Bazzi S. and Clemens M.A. (2013), ‘Blunt instruments: avoiding common pitfalls in identifying the causes of economic growth’, American Economic Journal: Macroeconomics 5(2): 152186.
Beckerman W. (1992), ‘Economic growth and the environment: whose growth? Whose environment?’, World Development 20: 481496.
Blanco G., Gerlagh R., Suh S., et al. (2014), ‘Drivers, trends and mitigation’, inEdenhofer O. et al. (eds), Climate Change 2014: Mitigation of Climate Change. Contribution of Working Group III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change, Cambridge: Cambridge University Press.
Bradford D.F., Fender R.A., Shore S.H., and Wagner M. (2005), ‘The environmental Kuznets curve: exploring a fresh specification’, B.E. Journal of Economic Analysis & Policy 4(1): art. 5.
Breusch T.S. and Pagan A.R. (1979), ‘A simple test for heteroscedasticity and random coefficient variation’, Econometrica 47: 12871294.
Brock W.A. and Taylor M.S. (2010), ‘The green Solow model’, Journal of Economic Growth 15: 127153.
Burke P.J. (2010), ‘Income, resources, and electricity mix’, Energy Economics 32(3): 616626.
Burke P.J. (2012), ‘Climbing the electricity ladder generates carbon Kuznets curve downturns’, Australian Journal of Agricultural and Resource Economics 56(2): 260279.
Burke P.J. (2013), ‘The national-level energy ladder and its carbon implications’, Environment and Development Economics 18(4): 484503.
Burke P.J. and Nishitateno S. (2013), ‘Gasoline prices, gasoline consumption, and new-vehicle fuel economy: evidence for a large sample of countries’, Energy Economics 36: 363370.
Burke P.J., Shahiduzzaman M., and Stern D.I. (2015), ‘Carbon dioxide emissions in the short run: the rate and sources of economic growth matter’, Global Environmental Change 33: 109121.
Carson R.T. (2010), ‘The environmental Kuznets curve: seeking empirical regularity and theoretical structure’, Review of Environmental Economics and Policy 4(1): 323.
Carson R.T., Jeon Y., and McCubbin D.R. (1997), ‘The relationship between air pollution and emissions: U.S. data’, Environment and Development Economics 2: 433450.
Chirinko R.S., Fazzari S.M., and Meyer A.P. (2011), ‘A new approach to estimating production function parameters: the elusive capital–labor substitution elasticity’, Journal of Business & Economic Statistics 29(4): 587594.
Chow G.C. and Li J. (2014), ‘Environmental Kuznets curve: conclusive econometric evidence for CO2 ’, Pacific Economic Review 19(1): 17.
Csereklyei Z. and Stern D.I. (2015), ‘Global energy use: decoupling or convergence?’, Energy Economics 51: 633641.
Dietz T. and Rosa E.A. (1997), ‘Effects of population and affluence on CO2 emissions’, Proceedings of the National Academy of Sciences 94: 175179.
Ehrlich P.R. and Holdren J.P. (1971), ‘Impact of population growth’, Science 171(3977): 12121217.
Evans P. (1996), ‘Using cross-country variances to evaluate growth theories’, Journal of Economic Dynamics and Control 20(6–7): 10271049.
Evans P. and Karras G. (1996), ‘Convergence revisited’, Journal of Monetary Economics 37(2): 249265.
Ezcurra R. (2007), ‘Is there cross-country convergence in carbon dioxide emissions?’, Energy Policy 35: 13631372.
Feenstra R.C., Inklaar R., and Timmer M.P. (2015), ‘The next generation of the Penn World Table’, American Economic Review 105(10): 31503182.
Friedman M. (1992), ‘Do old fallacies ever die?’, Journal of Economic Literature 30(4): 21292132.
Grossman G.M. and Krueger A.B. (1991), ‘Environmental impacts of a North American Free Trade Agreement’, Working Paper No. 3914, National Bureau of Economic Research, Cambridge, MA.
Grossman G.M. and Krueger A.B. (1995), ‘Economic growth and the environment’, Quarterly Journal of Economics 110: 353377.
Harvey A.C. (1976), ‘Estimating regression models with multiplicative heteroskedasticity’, Econometrica 44: 461466.
Hauk W.R. and Wacziarg R. (2009), ‘A Monte Carlo study of growth regressions’, Journal of Economic Growth 14: 103147.
Hausman J.A. (2001), ‘Mismeasured variables in econometric analysis: problems from the right and problems from the left’, Journal of Economic Perspectives 15(4): 5767.
Herrerias M.J. (2013), ‘The environmental convergence hypothesis: carbon dioxide emissions according to the source of energy’, Energy Policy 61: 11401150.
Holtz-Eakin D. and Selden T.M. (1995), ‘Stoking the fires? CO2 emissions and economic growth’, Journal of Public Economics 57(1): 85101.
Kaika D. and Zervas E. (2013a), ‘The Environmental Kuznets Curve (EKC) theory – Part A: concept, causes and the CO2 emissions case’, Energy Policy 62: 13921402.
Kaika D. and Zervas E. (2013b), ‘The environmental Kuznets curve (EKC) theory – Part B: critical issues’, Energy Policy 62: 14031411.
Kaya Y. (1990), ‘Impact of carbon dioxide emission control on GNP growth: interpretation of proposed scenarios’, Paper presented to the IPCC Energy and Industry Subgroup, Response Strategies Working Group, Paris.
List J.A. and Gallet C.A. (1999), ‘The environmental Kuznets curve: does one size fit all?’, Ecological Economics 31(3): 409423.
Maddala G.S. (1977), Econometrics, Singapore: McGraw-Hill.
Mazzanti M. and Musolesi A. (2013), ‘The heterogeneity of carbon Kuznets curves for advanced countries: comparing homogeneous, heterogeneous and shrinkage/Bayesian estimators’, Applied Economics 45(27): 38273842.
Millimet D.L., List J.A., and Stengos T. (2003), ‘The environmental Kuznets curve: real progress or misspecified models?’, Review of Economics and Statistics 85: 10381047.
Norman C.S. (2009), ‘Rule of law and the resource curse: abundance versus intensity’, Environmental and Resource Economics 43: 183207.
Ordás Criado C., Valente S., and Stengos T. (2011), ‘Growth and pollution convergence: theory and evidence’, Journal of Environmental Economics and Management 62: 199214.
Pasten R. and Figueroa E. (2012), ‘The environmental Kuznets curve: a survey of the theoretical literature’, International Review of Environmental and Resource Economics 6: 195224.
Pellegrini L. and Gerlagh R. (2006a), ‘Corruption, democracy, and environmental policy: an empirical contribution to the debate’, Journal of Environment & Development 15(3): 332354.
Pellegrini L. and Gerlagh R. (2006b), ‘Corruption and environmental policies: what are the implications for the enlarged EU?’, European Environment 16(3): 139154.
Pettersson F., Maddison D., Acar S., and Söderholm P. (2013), ‘Convergence of carbon dioxide emissions: a review of the literature’, International Review of Environmental and Resource Economics 7: 141178.
Quah D. (1993), ‘Galton's fallacy and the tests of the convergence hypothesis’, Scandinavian Journal of Economics 95(4): 427443.
Rafaj P., Amann M., Siri J., and Wuester H. (2014), ‘Changes in European greenhouse gas and air pollutant emissions 1960–2010: decomposition of determining factors’, Climatic Change 124(3): 477504.
Rosa E.A. and Dietz T. (1998), ‘Climate change and society: speculation, construction and scientific investigation’, International Sociology 13(4): 421455.
Shafik N. (1994), ‘Economic development and environmental quality: an econometric analysis’, Oxford Economic Papers 46: 757773.
Smith S.J., van Ardenne J., Klimont Z., Andres R.J., Volke A., and Arias S.D. (2011), ‘Anthropogenic sulfur dioxide emissions: 1850–2005’, Atmospheric Chemistry and Physics 11: 11011116.
Solow R.M. (1956), ‘A contribution to the theory of economic growth’, Quarterly Journal of Economics 70(1): 6594.
Stefanski R. (2013), ‘On the mechanics of the “Green Solow Model”’, OxCarre Research Paper No. 47, University of Oxford.
Stern D.I. (2004), ‘The rise and fall of the environmental Kuznets curve’, World Development 32(8): 14191439.
Stern D.I. (2005), ‘Beyond the environmental Kuznets curve: diffusion of sulfur-emissions-abating technology’, Journal of Environment and Development 14(1): 101124.
Stern D.I. (2010), ‘Between estimates of the emissions-income elasticity’, Ecological Economics 69: 21732182.
Stern D.I. (2012), ‘Modeling international trends in energy efficiency’, Energy Economics 34: 22002208.
Stern D.I. and Common M.S. (2001), ‘Is there an environmental Kuznets curve for sulfur?’, Journal of Environmental Economics and Management 41: 162178.
Strazicich M.C. and List J.A. (2003), ‘Are CO2 emission levels converging among industrial countries?’, Environmental and Resource Economics 24(3): 263271.
Tsurumi T. and Managi S. (2015), ‘Environmental Kuznets curve: economic growth and emission reduction’, in Managi S. (ed.), The Economics of Green Growth: New Indicators for Sustainable Societies, Abingdon: Routledge, pp. 4970.
Vollebergh H.R.J., Melenberg B., and Dijkgraaf E. (2009), ‘Identifying reduced-form relations with panel data: the case of pollution and income’, Journal of Environmental Economics and Management 58(1): 2742.
Wagner M. (2008), ‘The carbon Kuznets curve: a cloudy picture emitted by bad econometrics’, Resource and Energy Economics 30: 388408.
Wagner M. (2015), ‘The environmental Kuznets curve, cointegration and nonlinearity’, Journal of Applied Econometrics 30(6): 948967.
WCED (World Commission on Environment and Development) (1987), Our Common Future, Oxford: Oxford University Press.
Westerlund J. and Basher S.A. (2008), ‘Testing for convergence in carbon dioxide emissions using a century of panel data’, Environmental and Resource Economics 40: 109120.
White H.A. (1980), ‘A heteroskedasticity-consistent covariance matrix estimator and a direct test for heteroskedasticity’, Econometrica 48: 817838.
World Bank (1992), World Development Report 1992: Development and the Environment, New York: Oxford University Press.
Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

Environment and Development Economics
  • ISSN: 1355-770X
  • EISSN: 1469-4395
  • URL: /core/journals/environment-and-development-economics
Please enter your name
Please enter a valid email address
Who would you like to send this to? *
×
Type Description Title
PDF
Supplementary materials

Stern supplementary material
Online Appendix

 PDF (236 KB)
236 KB

Metrics

Full text views

Total number of HTML views: 6
Total number of PDF views: 85 *
Loading metrics...

Abstract views

Total abstract views: 533 *
Loading metrics...

* Views captured on Cambridge Core between 27th April 2017 - 18th December 2017. This data will be updated every 24 hours.