An Analysis of the Environmental Kuznets Curve Using Time Series Data

Abstract

The environmental Kuznets curve attempts to describe the progression of a country's environmental quality as it develops economically. This curve suggests that pollution will first increase and then decrease as development proceeds. Thus far, the majority of the empirical literature supporting the Environmental Kuznets Curve hypothesis has been drawn from cross-sectional and panel data. For various reasons, the use of cross-section data in environmental Kuznets curve analysis is problematic, and time-series data is preferred. This paper analyzes historical time series emissions estimations for several countries at different stages of development to determine if the environmental Kuznets curve accurately describes how individual countries behave. Additionally, data from Poland, a country formerly in the soviet bloc is analyzed to determine what effect, if any, a population's willingness to pay for environmental quality will have on its environmental Kuznets curve. The data analyzed in this paper suggests that the environmental Kuznets curve is an adequate description of what happens to a country's emissions as it develops. However, there are some problems in the traditional regression form used in the model. Additionally, the data from Poland does support the hypothesis that a country's pollution levels are, in part, determined by it's citizen's willingness to pay for environmental quality, and not solely by the composition of its output.