The Environmental Kuznets Curve for Water Quality : An Analysis of Its Appropriateness Using Unit Root and Cointegration Tests

The Environmental Kuznets Curve (EKC) hypothesis suggests the existence of an inverted U-shaped relationship between environmental degradation and per capita income. It has been assumed that the environmental impacts occurred during the first stages of the development process will eventually be reverted as a result of economic growth. Several studies, such as Perman and Stern's (2003), have shown that the econometric methods used in the earlier analysis of the EKC are inappropriate given the time properties of the series. This paper analyzes the appropriateness of the EKC hypothesis for a panel of 46 countries and 20 periods by implementing individual and panel tests for both unit roots and cointegration. An error correction model -VEC- is also estimated for the panel. The results do not support the evidence of a common EKC for the countries analyzed