Investigating the non-linearity between national income and environmental pollution: international evidence of Kuznets curve

This paper analyzes how national income (per capita real GDP) influ- ences the environmental pollution (per capita CO2 emissions) using a very heterogenous sample composed by 120 countries during the 2000–2009 period. We first apply a panel unit root test suggested by Im et al. (J Econometr 115(1):53–74, 2003) to examine the stationarity properties of CO2 emissions and GDP and then a two-step generalized method of moments (GMM) estimator, paying particular attention to the non-linearity of the national income–environmental pollution rela- tionship, to investigate the existence of a Kuznets curve for CO2 emissions. Pre- liminary evidence showing the existence of an inverted U-shaped relationship between national income and environmental pollution, validating the Kuznets’s hypothesis, turned out to be measleading once the issue of (non) stationarity has been taken into account. Results also show that as population and industrial output expand, more pressure will be put forth the environment, leading to more emissions, calling for more strict environmental and energy conservation policies.