Economic Liberalization and the Environmental Kuznets Curve: Some Empirical Evidence

Abstract

This paper applies the Environmental Kuznets Curve (EKC) model to examine the impact of trade openness, foreign direct investment liberalization, the decreasing role of the state, energy consumption and urbanization on per capita emission in countries at various stages of economic development and as a group. For this purpose, a dynamic panel estimation applying the Arellano-Bondi¯s Generalized Method of Moments (GMM) was conducted using the average of five-year observations from 1980?2009. The findings suggest that while trade and Foreign Direct Investment (FDI) are not expected to affect environmental quality, increasing role of the state has a negative and significant impact only in developed countries. Further, the results suggest that energy consumption has a significant impact on all countries regardless of their stage of development, while urbanization affects environmental quality only in the least developed countries.