Pollution and economic growth: a maximum likelihood estimation of environmental Kuznets curve

Abstract

As in Brock and Taylor (2011) in this paper we consider the importance of the relationship between the Environmental Kuznets Curve (EKC) Literature and the Economic Growth Theories. To address this issue we construct country production functions that directly incorporate CO2 emissions as input and estimate them using Stochastic Frontiers. This approach differs from that of Brock and Taylor (2011) but is similar to the one followed by Koop (1998). By introducing the environmental “bads” directly in the production function, we can analyse their contribution to total output growth. We highlight an important contribution of CO2 emissions to growth and find out that the EKC seems not to hold, at least for most countries