Nonlinearity, Heterogeneity and Unobserved Effects in the CO2-Income Relation for Advanced Countries

39 Pages Posted: 23 Nov 2013

See all articles by Massimiliano Mazzanti

Massimiliano Mazzanti

University of Ferrara

Antonio Musolesi

University of Ferrara & CERIS CNR, Italy; CESAER INRA, UMR, France

Date Written: November 20, 2013

Abstract

We study long run carbon emissions-income relationships for advanced countries grouped in policy relevant groups: North America and Oceania, South Europe, North Europe. By relying on recent advances on Generalized Additive Mixed Models (GAMMs) and adopting interaction models, we handle simultaneously three main econometric issues, named here as functional form bias, heterogeneity bias and omitted time related factors bias, which have been proved to be relevant but have been addressed separately in previous papers. The model incorporates nonlinear effects, eventually heterogeneous across countries, for both income and time. We also handle serial correlation by using autoregressive moving average (ARMA) processes. We find that country-specific time-related factors weight more than income in driving the northern EU Environmental Kuznets. Overall, the countries differ more on their carbon-time relation than on the carbon-income relation which is in almost all cases monotonic positive. Once serial correlation and (heterogeneous) time effects have been accounted for, only three Scandinavian countries - Denmark, Finland and Sweden - present some threshold effect on the CO2-development relation.

Keywords: Environmental Kuznets Curve, Semiparametric Models, Generalized Additive Mixed Models, Interaction Models

JEL Classification: C14, C23, Q53

Suggested Citation

Mazzanti, Massimiliano and Musolesi, Antonio, Nonlinearity, Heterogeneity and Unobserved Effects in the CO2-Income Relation for Advanced Countries (November 20, 2013). FEEM Working Paper No. 91.2013. Available at SSRN: https://ssrn.com/abstract=2357334 or http://dx.doi.org/10.2139/ssrn.2357334

Massimiliano Mazzanti (Contact Author)

University of Ferrara ( email )

C.so Ercole I° d'Este 37
Ferrara, 44100
Italy

Antonio Musolesi

University of Ferrara & CERIS CNR, Italy; CESAER INRA, UMR, France ( email )

Via Bassini, 15
20133 Milano
Italy

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