Testing the moderating role of urbanization on the environmental Kuznets curve: empirical evidence from an emerging market.

Abstract

Over the last 50years, urban population of Turkey has grown from 25 to 75%. Urbanization is highly linked with one of the most important global problems which is global warming through accelerating economic growth, energy consumption, and trade openness that are considered to be the main indicators of climate change in environmental literature. The main purpose of the present research is to examine the long-run effect of economic growth, energy consumption, trade openness, and urbanization on environmental degradation and causal link among the indicators under consideration in Turkey by taking into account the moderating role of urbanization over the period of 1960-2016. Aiming to establish robust findings, this study utilized both traditional and modern econometric techniques, including Bayer and Hanck cointegration, Gregory and Hansen cointegration, fully modified ordinary least squares (FMOLS) and dynamic ordinary least square (DOLS), Granger causality, Toda-Yamamoto causality, and Gradual Shift causality tests. The cointegration tests reveal that carbon dioxide (CO2) emissions and economic growth, energy consumption, trade openness, urbanization, and the moderating role of urbanization are cointegrated. The outcomes of the long-run estimators-FMOLS and DOLS-reveals that environmental Kuznets curve (EKC) hypothesis is valid and the existence of moderating role of urbanization on indicators of CO2 emissions is confirmed for the case of Turkey. Moreover, the causality tests mirror that while energy consumption, trade openness, and urbanization are important for predicting CO2 emissions, the moderating role of urbanization leads CO2 emissions in the short run.