An Empirical Analysis of the Environmental Kuznets Curve Hypothesis Over Two Centuries:Evidence from the UK and US

Abstract

The object of this Master thesis is to investigate empirically the validity of the Environmental Kuznets Curve hypothesis for two industrialized countries, USA and United Kingdom with a time span of more than two centuries. According to the EKC hypothesis as the economy of one’s country develops the degradation of the environment increases, but when the economy reaches a specific level of income per capita, known as turning point, pollution starts to decline. The EKC hypothesis implies that despite the fact that at first stages of development, pollution is unavoidable, in the end the economic growth will be one of the solutions to the pollution problem. The concept that economic development will eventually lead to the improvement of the quality of the environment is very appealing. Growth, which has been accused as the main cause of the environmental degradation and now is seen as a “savior” of the environment has spurred the interest of policy designers. Instead of hampering the growth of the economy, measures that make economy to grow even faster is what needs. The investigation of the validity of the EKC hypothesis is of great interest and importance due to increasing environmental problems of today. If nations continue to ignore these problems then it will be catastrophic for all humanity. It is crucial policy measures for the protection of environment to be taken before it is too late. However, environmental policy must be based on a theory which has been validated by empirical results.