We explore the idea of regime switching as a new methodological
approach in the analysis of the emission - income relationship. We formalize
the idea by using a simple static model of profit maximization
where above a threshold income level a more stringent environmental
policy induces a decreasing emission-income relationship. At the empirical
level we estimate such a regime switching model and we find an
inverse-V-shaped emission - income relationship. .Our findings are in
line with the original papers in this literature. We estimate thresholds
which can be viewed as turning points, and which occur at reasonable
values.
01/01/2002
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