Corruption and the environmental Kuznets Curve: Empirical evidence for sulfur

Abstract

We investigate how corruption influences the income level at the turning point of the relationship between sulfur emissions and income, using a wide cross-national panel of countries, at different levels of development and with different degrees of corruption. Our results support the Environmental Kuznets Curve hypothesis for sulfur. We find evidence that the higher the country's degree of corruption, the higher the per capita income at the turning point, suggesting different income–pollution paths across countries due to corruption. We build upon a new specification for the EKC developed by Bradford et al. (2005) that avoids using nonlinear transformations of potentially nonstationary regressors in panel estimation. Also, we account for the indirect impact of corruption on emissions through its impact on per capita income. Our main findings remain unchanged when we investigate additional heterogeneity allowing for different income slopes across richer and poorer countries.