Does urbanization redefine the environmental Kuznets curve? An empirical analysis of 134 Countries

Abstract

• The impact of urbanization on the coupling between economy and environment is non-linear. • The traditional EKC theory is extended by adding the social indicator. • Threshold regression model is applied to investigate the non-linear causality. • Comparatively analyzes the threshold regression results of four income groups. • Urbanization does not help reduce environmental pressures. The purpose of this article is to explore the impact of urbanization on the coupling of economic growth and environmental quality. The traditional environmental Kuznets curve (EKC) hypothesis explains the inverted U-shaped relationship between the economy and the environment. This study expands the traditional EKC theory by adding social indicator, which also corresponds to the three aspects (social, economic, and environmental) required for sustainable development in 2030. Based on the panel data of 134 countries from 1996 to 2015, the threshold regression model is applied to investigate the non-linear causality between the variables. The threshold variable is urbanization, and the impact mechanism of economic growth on carbon dioxide emissions and ecological footprint is tested. The results show that: urbanization strengthens the positive correlation between the economy and carbon emissions and ecological footprint. The positive effect of economic growth on the ecological footprint is greater than that of carbon emissions. Trade openness and natural resource rents increase environmental pressure. Population aging and renewable energy improve the quality of the environment. There is heterogeneity in the values and change trend of the regression coefficients of different income groups. Unlike the coefficient growth trend in the results of all countries, the following situations occur. As urbanization successively crosses the threshold, the positive effect of economic growth on carbon dioxide emissions in high income countries diminishes. The coefficient of the lower middle income group has an inverted U-shape. When the ecological footprint is the explained variable, the coefficient of the high income group becomes U-shaped.