Testing Environmental Kuznets Curve in the Selected Transition Economies with Panel Smooth Transition Regression Analysis

The Environmental Kuznets Curve (EKC) introduces an inverted U-shaped relationship between environmental pollution and economic development. The inverted U-shaped curve is seen as complete pattern for developed economies. However, our study tests the EKC for developing transition economies of European Union, therefore, our results could make a significant contribution to the literature. In this paper, the relationship between carbon dioxide (CO2) emissions, gross domestic product (GDP), energy use and urban population is investigated in the Transition Economies (Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and Slovenia). Environmental Kuznets Curve is tested by panel smooth transition regression for these economies for 1993 – 2010 periods. As a result of study, the hypothesis of linearity was rejected and no-remaining nonlinearity test showed that there is a smooth transition exists between two regimes (below $5176 GDP per capita is first one and above $5176 GDP per capita is second one) in the related period for these economies.