Occurrence of turnig points on environmental kuznets curve: Sharp breaks or smooth shifts?

Abstract

In this study, the validity of the environmental Kuznets Curve hypothesis was tested for the period 2000-2018 across 75 countries with various income levels. In addition to the parabolic model, threshold and smooth transition panel regression models were used to estimate the threshold value and the relationships among variables. It was concluded that there is one threshold value for the parabolic and threshold panel regression model and two for the smooth transition panel regression model, one of which is equal to that obtained from the threshold panel regression model. Whereas the relationship between per capita income and environmental pollution is weak between the first and second thresholds, after the second threshold, it is stronger. In addition, how close to transition of countries that are in the transition from scale effect to composition effect and from composition effect to technological effect was determined from the result of analysis. Precisely determining how long countries are left in front of the transition to the next effect will be a guide for adjusting the weight they will put on environmental policies.