Testing the Environmental Kuznets Curve (EKC) for the United States

Abstract

This study empirically tests the Environmental Kuznets Curve (EKC) hypothesis for the United States using annual data from 1971 to 2021. The EKC posits an inverted U-shaped relationship where economic growth initially exacerbates environmental degradation before eventually mitigating it after a certain income threshold is reached. This analysis uses ecological footprint per capita to measure environmental degradation and GDP per capita to represent economic growth. The methodology applies Ordinary Least Squares (OLS) and Generalized Least Squares (GLS) regression techniques to model the non-linear relationship. A key contribution is the incorporation of a structural break analysis to account for the effects of the 2008 global financial crisis, which was confirmed to be statistically significant. The GLS estimation, which corrects for serial correlation present in the OLS model, provides clear evidence supporting the EKC hypothesis for the U.S. The results indicate that while initial economic growth increases the ecological footprint, a turning point is reached after which higher income levels lead to environmental improvement. This finding underscores the critical role of technological advancement, scale effects, and regulatory frameworks in enabling sustainable development pathways in high-income economies.