Is the environmental Kuznets curve hypothesis valid for all countries? Fresh insights from bias-corrected dynamic panel data models.

This study examines the relationship between economic growth and carbon dioxide emissions, testing the environmental Kuznets curve hypothesis for 147 countries from 1995 to 2018 using a bias-corrected dynamic panel data model. GDP per capita is the main explanatory variable, with industrialization, foreign direct investment, and globalization as controls. Results show strong persistence of emissions across all income groups, with the highest inertia in middle- and low-income countries, indicating that past emissions heavily influence current levels. An inverted U-shaped environmental Kuznets curve is confirmed for high- and middle-income countries, where economic growth initially increases but later reduces emissions after surpassing a threshold-consistent with the role of technology and governance in environmental improvement. In low-income countries, a U-shaped pattern emerges, implying continued environmental degradation as economies grow, reflecting limited regulatory capacity and carbon-intensive development paths. Industrialization significantly increases emissions in high-income countries, highlighting the environmental burden of advanced but energy-intensive industries. Foreign direct investment raises emissions in low- and middle-income economies, supporting the pollution haven hypothesis, while its effect is negligible in high-income countries. Globalization increases emissions in low-income nations, due to carbon-intensive trade and resource exploitation, but shows no significant impact middle- and high-income level countries. These findings underscore the need for income-specific policies to decouple growth from emissions. In low- and middle-income countries, stricter environmental regulations, enhanced institutional capacity, and clean technology transfer are essential to avoid locking in high-carbon trajectories. The persistence of emissions suggests that policy impacts will be gradual, requiring long-term strategies and coordinated international efforts.