Does Economic Growth Impact Environmental Degradation? Evidence from OECD Countries Using the Panel Dynamic Threshold Model

Various studies and research were carried out, particularly by developed countries, to ensure that the production process, a fundamental part of economic growth and development, is carried out in an environmentally sustainable manner. In this context, the theory known as the Environmental Kuznets Hypothesis (EKH), which addresses the association between income levels and environmental damage, has been widely tested by researchers. This study investigates the relationship between income levels and environmental damage in OECD member countries and tests the validity of the EKH. For this purpose, data covering the period 1965-2020 were analyzed using a panel data-based dynamic threshold model. The analysis results suggest that the income threshold value is calculated as 3,204. The findings confirm the validity of the EKH. Additionally, the results reveal that economic growth negatively impacts the environment and leads to environmental degradation until the income threshold level is reached. However, in line with the hypothesis, once the income threshold level is exceeded, the adverse effects of economic growth on environmental degradation gradually diminish. When all findings are considered together, it is clearly demonstrated that the association between income level and environmental damage exhibits an inverted U-shape pattern