Environmental Kuznets curve for deforestation: evidence using GMM estimation for OECD and non-OECD regions

Abstract

The depletion of the world's forests in both tropical and temperate regions threatens to cause considerable environmental problems and hamper future economic development. However, some research has suggested that this deforestation might slow or reverse, exhibiting an Environmental Kuznets Curve (EKC). Yet previous studies investigating such an EKC have found mixed results. We therefore test for a deforestation EKC using an improved dataset from the World Development Indicators and an enhanced econometric technique Arellano-Bover/Blundell-Bond Generalized Method of Moments (GMM) estimator. We compare OECD countries with the non-OECD regions of Latin America, Asia, and Africa to determine how various factors like economic growth, population, trade, urbanization, agricultural land conversion, and cereal yield impact deforestation rates. The results show that the OECD countries have an N-shaped curve whereas only the African region experiences an income-based EKC pattern. Population growth tends to create more deforestation as does conversion to agricultural lands. More trade openness and greater urbanization impact the regions differently, but only the OECD countries have less deforestation due to better cereal yields.

Projecting Global and Regional Forest Area under the Shared Socioeconomic Pathways Using an Updated Environmental Kuznets Curve Model

“…Aggregate global forest area is projected to increase by 7% as of 2100 relative to 2015 levels in SSP3, which predicts a future with the lowest rate of economic growth, and by 36% in SSP5, which is a future with the highest rate of economic growth and greater economic equality across countries. The results show how projections driven only by income produce biased results compared to the projections made with an EKC that includes rural population density and labor force variables.Applied to forest resources, the EKC hypothesis describes a long-term relationship between deforestation (or forest area) and Y/N [5][6][7][8]. The EKC implies that the loss of forest area increases with rising Y/N during the earlier stages of economic growth, reaches a peak, and then diminishes with further increases in Y/N.…”

“…For the EKC, forest loss is related to Y/N and (Y/N) 2 , which have expected positive and negative coefficients, respectively. Likewise, relating forest area to these same terms should generate a negative coefficient for Y/N and a positive coefficient for (Y/N) 2 [8,9]. Empirical study of these relationships to Y/N often includes attention to additional (control) variables that further explain changes in deforestation or forest area.…”

“…Empirical study of these relationships to Y/N often includes attention to additional (control) variables that further explain changes in deforestation or forest area. Control variables could include macroeconomic, institutional, and societal variables which, if found to be significant, provide additional insights into the proximate drivers of observed changes in forests area over time and across countries or regions, potentially informing policy.Econometric analyses of the EKC or forest area change, viewed in toto, provide conflicting evidence on the existence of their relationships to Y/N [3,[5][6][7][8][9][10][11][12][13][14][15]. While a systematic assessment of the evidence in support of the EKC is still lacking, the existing mixed support for the hypothesis may result from diversity in empirical specifications such as a variety of control variables, different sets of countries, time spans, types of data, and varied statistical methods applied.Among the first empirical tests of the EKC for deforestation was by Shafik and Bandhopadhya [3], who found no empirical support for the existence of either linear, quadratic, or cubic relationships between deforestation (both annual and total) and Y/N using data from 1961-1986, who modeled deforestation as a quadratic function of Y/N and population density using cross-sectional data on deforestation for 47 developing countries and 68 developing and developed countries combined, found support for the EKC for both country groups.…”

“…Applied to forest resources, the EKC hypothesis describes a long-term relationship between deforestation (or forest area) and Y/N [5][6][7][8]. The EKC implies that the loss of forest area increases with rising Y/N during the earlier stages of economic growth, reaches a peak, and then diminishes with further increases in Y/N.…”

“…Econometric analyses of the EKC or forest area change, viewed in toto, provide conflicting evidence on the existence of their relationships to Y/N [3,[5][6][7][8][9][10][11][12][13][14][15]. While a systematic assessment of the evidence in support of the EKC is still lacking, the existing mixed support for the hypothesis may result from diversity in empirical specifications such as a variety of control variables, different sets of countries, time spans, types of data, and varied statistical methods applied.…”