Is there an environmental Kuznets curve for water use? A panel smooth transition regression approach

This paper presents an analysis of the relationship between per capita water use and per capita income for 65 countries over the period 1962-2008 within the framework of the so-called environmental Kuznets curve (EKC). Consistent with the existing literature, a polynomial fixed effects model is firstly presented. Then, a logistic Panel Smooth Transition Regression (PSTR) is estimated, capturing individual heterogeneity and time variability of income elasticity. This empirical study yields several important findings. The nexus between water withdrawal per person and per capita GDP is non-linear, showing a peculiar U-inverted with a marked downward limb that dominates the nexus regardless the estimation method chosen. On the whole, water use income elasticity clearly decreases throughout the period; nevertheless it exhibits a great variability over the sample, reflecting the divergent patterns of water use depending on the level of income of each country and period.