Re-Examining the Empirical Evidence for Stochastic Convergence of Two Air Pollutants with a Pair-Wise Approach

Abstract

This paper examines the hypothesis of stochastic convergence for two air pollutants emissions (carbon dioxide [CO2] and sulfur dioxide [SO2]). The value-added of this paper lies in the use of a recent, alternative econometric method, a pair-wise approach that considers all the possible pairs of log per-capita pollutant emission gaps across all the countries in the sample. In this method, all emissions differences must be stationary around a constant mean. Empirical results support different conclusions on stochastic convergence in per capita CO2 and SO2 emissions depending on the choice of the unit root test. The use of specific critical values from the ADF-KPSS joint test overcomes these initial conflicting results and leads to small percentages of stationary pairs around a constant mean; which invalidate the hypothesis of stochastic convergence for per capita emissions of CO2 and SO2, even over the OECD sub-dataset.