Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2022-12-15
Number: 22-092/III
Author-Name: Yicong Lin
Author-Workplace-Name: Vrije Universiteit Amsterdam
Author-Name: Hanno Reuvers
Author-Workplace-Name: Erasmus University Rotterdam
Title: Cointegrating Polynomial Regressions With Power Law Trends: Environmental Kuznets Curve or Omitted Time Effects?

Abstract: The environmental Kuznets curve predicts an inverted U-shaped relationship between air pollution and economic growth. Current analyses frequently employ models that restrict nonlinearities in the data to be explained by economic growth only. We propose a Global Trend
Augmented Cointegrating Polynomial Regression (GTACPR) to allow for nonlinearities in time
and economic growth. The theoretical properties of the GTACPR are established. Empirically,
a single global trend accurately captures all nonlinearities for all the countries studied, leading to a linear relationship between GDP and CO2. This suggests that the environmental
improvement of the last years is due to factors different from GDP.

Classification-JEL: C12, C13, C32, Q56
Keywords:
File-URL: https://papers.tinbergen.nl/22092.pdf
File-Format: application/pdf
File-Size: 5.321.481 bytes
Handle: RePEc:tin:wpaper:20220092