The Environmental Kuznets Curve in a long-term perspective: Parametric vs semi-parametric models

Abstract

Empirical studies of the EKC hypothesis may be very sensitive to datasets, specifications, and functional forms. The aim of this paper is to investigate the long-run relationship among CO2 emissions, real GDP, and energy consumption using a panel of 9 advanced economies from 1870 to 2008 using both parametric and semi-parametric additive models. While at the panel level the results provide support to the Environmental Kuznets Curve (EKC) only in the post-1950s period, at the individual country level the inverted U-shaped relationship between CO2 and real GDP is validated for a subset of countries only. However, when a semi-parametric regression framework is applied an inverse U-shaped pattern becomes clear for all countries of the sample, except Canada. Empirical findings indicate that relaxing the restrictions associated with parametric regression models may be critical for the question of investigating the existence of the EKC.