Georgian Environmental Kuznets Curve: An Appropriate Estimation.

Sammanfattning

Empirical EKC literature has conceptual flaws that arise due to the inclusion of polynomials and cointegrating relationships of powers of integrated processes. Additionally, previous studies focused on a narrow nexus between environmental degradation and economic growth that yield only a partial EKC. Considering hereinabove mentioned points the aim of this study is to assess the EKC hypothesis in the case of Georgia using a composite measure of environmental degradation and employing the appropriate estimation of the cointegrating polynomial relationship developed by Wagner (2015). The proposed estimation model is an extension of a fully modified estimator of Phillips and Hansen (1990). Additionally, the model specification and cointegrating relationship have been tested using a special KPSS-type test derived by Wagner (2015). The main findings suggest that an inverted U-shaped relationship exists when changes in biocapacity deficit/reserve, Kyoto basket of greenhouse gas emissions, and carbon dioxide emissions are incorporated into the analysis. However, Environmental Degradation Index does not support the existence of EKC.