The Effect of Growth and Corruption on Soil Sealing in Italy: A Regional Environmental Kuznets Curve Analysis

Abstract

This paper analyses and looks more closely at the empirical debate regarding the Income Elasticity Hypothesis postulated in relation to the Environmental Kuznets Curve, and the impact of corruption on the relationship between growth and environmental impact, measured in terms of soil sealing, as proxied by the number of Building Permits issued by public authorities. It postulates that when current private rent is high compared to perceived social costs and a large enough minority benefits from the rules, the EKC does not emerge and public intervention fails to perceive social optimality. To validate this hypothesis, we run a panel data regression model based on data from all Italian regions. Results confirmed the hypothesis evidencing a U-shaped relationship, i.e. a detrimental relationship between income and environmental impact/quality. It also demonstrated that this is contingent on the level of corruption. The latter affects the position and the shape of the inverted EKC, speeding up the exploitation process. It shows that the higher the income, the higher the effect of corruption on the environment. Therefore, it advocates caution against any simplistic inference from EKC.