Environmental degradation and real per capita output: New evidence at the global level grouping countries by income levels

The objective of this research is to examine the relationship between real per capita output and carbon dioxide emissions, both globally and by groups of countries. We used panel data from 151 countries for the period 1980-2016. The countries are classified according to income levels using the World Bank Atlas Method. The argument behind this classification is that the strength of the relationship between the two variables differs according to the income levels of countries. Based on the theoretical framework of the Kuznets environmental curve, we found that there is a strong U-shaped relationship between the two variables in middle-high and low income countries. The hypothesis of the Kuznets environmental curve holds true in high-income and middle-high income countries. The inclusion of additional covariants shows that urbanization has a positive and significant relationship with carbon dioxide emissions middle-high and middle-low income countries. Energy consumption and manufacturing have a positive and statistically significant relationship with carbon dioxide emissions in all the groups of countries. A possible implication of economic policy derived from our research is that incentives to production should focus on activities that use environmentally friendly technologies to limit the irreversible damage caused by contamination.