Environmental Kuznets curves: Bayesian evidence from switching regime models

Abstract

The purpose of the paper is to test empirically the existence of an environmental Kuznets curve (EKC), using switching regime models along with cross-sectional data and Bayesian Markov chain Monte Carlo methods to perform the computations. The models are based on the normal and Student's t distributions. These methods allow us to present exact, finite-sample posterior distributions of switching regime model parameters as well as exact probabilities of separation of countries into regimes of high and low environmental degradation. Our evidence indicates a monotonic relationship between environmental degradation and income and thus rejects the existence of an EKC. Additionally, we find that several economic and demographic variables cannot explain the distinction between low and high damage countries. (C) 2001 Elsevier Science B.V. All rights reserved.