Abstract

This paper tests the effect of gross domestic product (GDP) per capita on pollution,
measured by carbon dioxide (CO2) emissions per capita. World Bank 1992 study claims that pollution
rises with income, but at a slower and slower speed and eventually declines. Using Ordinary Least
Squares estimation procedure, we find a quadratic relationship (“inverted U-hypothesis”) between CO2
emissions per capita and GDP per capita in a cross-section of world countries with data from 2000,
thus proving the existence of Environmental Kuznets Curve. The result is important because it may
have important policy implications.