Environmental Phillips and Kuznets curves in organization for economic cooperation and development states: Fresh insights

Abstract

This research extends the literature on the environmental Phillips curve (EPC) and environmental Kuznets curve (EKC) by focusing on the 38 member economies of the Organization for Economic Co-operation and Development (OECD). Using panel data from 2000 to 2021, the study employs several econometric techniques, including fixed effects, feasible generalized least squares, two-stage least squares, and the generalized method of moments. Our primary findings reveal that unemployment has a significant negative impact on CO₂ emissions, thereby supporting the validity of the EPC hypothesis within OECD countries. This suggests a trade-off between unemployment and reductions in CO₂ emissions. Similarly, the results validate the EKC hypothesis, with further analysis indicating that the EKC exhibits an N-shaped curve—an important contribution to the literature on environmental dynamics in advanced economies. Additionally, the results show that both trade openness and renewable energy usage have significantly improved environmental quality in OECD economies. Finally, extensive causality testing identifies both one-way and two-way causal relationships among the key variables examined. These findings have important policy implications for the management of environmental quality and macroeconomic variables in the OECD context.