Economic Indicators and Environmental Expenditure: A Re-evaluation of the Kuznets Curve in the EU-27

Abstract

This study uses data from the European Union (EU-27) member states to examine the relationship between environmental expenditure and key socioeconomic indicators, including Gross Domestic Product (GDP) per capita, population size, urban population and unemployment rate. The analysis investigates if environmental expenditure follows the patterns suggested by the Environmental Kuznets Curve (EKC) hypothesis by applying linear and quadratic regression models. The results show a strong positive relationship between urbanization and environmental expenditure. However, rather than following the expected inverted U-shaped curve suggested by the EKC, the relationship between GDP per capita and environmental expenditure is more linear. The study finds a fairly significant negative relationship between unemployment and environmental expenditure but no significant relationship is observed between population size and environmental spending. These findings have significant policy implications as they highlight how urbanization affects environmental expenditure and the necessity of devising economic strategies that incorporate environmental protection at different stages of economic growth.