The Social Cost of Growth: Unemployment and Environmental Degradation in the Mediterranean Region

The interrelationship between economic variables and environmental degradation has been extensively investigated within various economic paradigms, including the Environmental Kuznets Curve (EKC) and, more recently, the Environmental Phillips Curve (EPC). Given the increasing global focus on sustainable economic policies, understanding these relationships is crucial for designing effective environmental and labor market policies. The present study aims to examine the hypothesis of the existence of the Environmental Phillips Curve in Mediterranean countries from 1995 to 2021 while also reassessing the validity of the EKC within this regional context. Specifically, this research investigates how economic growth and unemployment influence environmental pollution. The study utilizes the Westerlund cointegration test with bootstrap to verify long-term relationships among the variables. Furthermore, Fully Modified Ordinary Least Squares (FMOLS) and Dynamic Ordinary Least Squares (DOLS) estimation methods are applied to examine the long-run effects comprehensively. The empirical results indicate that the variables are cointegrated, suggesting the presence of a stable, long-term equilibrium relationship. The findings substantiate the validity of both the Environmental Kuznets Curve and the Environmental Phillips Curve in Mediterranean countries. This indicates that there is a U-shaped relationship between economic growth and ecological footprint, and that there is a negative relationship between unemployment rates and ecological footprint.