REASSESSING THE ENVIRONMENTAL KUZNETS CURVE: THE SQUARED-TERM IMPACT OF GLOBALIZATION ON ENVIRONMENTAL QUALITY IN DEVELOPING ECONOMIES

Abstract

This study reassesses the Environmental Kuznets Curve (EKC) by exploring the squared-term effect of globalization on environmental quality in developing economies using panel data from 2000–2024. Environmental quality is proxied by ecological footprints, while economic growth is represented by per capita income. Human development is measured using the United Nations Development Programme’s Human Development Index (HDI), and globalization is captured through the KOF Globalization Index (KOFGI). To ensure robustness, foreign direct investment (FDI) and financial development are included as control variables. The analysis employs the Generalized Method of Moments (GMM) estimator to address potential endogeneity.

Findings reveal a positive and significant lagged effect of globalization on ecological footprints, indicating that globalization initially degrades environmental quality in underdeveloped nations. However, the squared-term of globalization has a negative and significant impact, confirming an inverted U-shaped EKC relationship. This implies that while globalization initially harms the environment, its effects become beneficial after surpassing a certain threshold. Moreover, improvements in human development are shown to enhance environmental awareness and contribute positively to environmental quality over time.