The Growth of the Economy and Trees

analyse the relationship between economic development and deforestation by testing this for the Environmental Kuznets Curve (EKC) hypothesis. It hypothesizes that, as the economy develops, deforestation will first increase before it decreases. Empirical evidence for this inverted U-shaped relationship has sometimes been taken to conclude that economic growth is generally good for the environment. This paper addresses this implication by testing the following hypothesis: the relationship between economic growth and deforestation follows an inverted U-shaped relationship. A quadratic fixed-effects regression is first employed to test the model for all countries and later separately for the EU, Latin America, and Asia. The panel data consists of 56 countries over the period 1990 to 2015. Total population, population density, “openness” of the economy, fossil fuel energy consumption, and value of agriculture are included as control variables. The applicable regression coefficients are found to be insignificant and therefore the null-hypothesis cannot be accepted. This result is both consistent and inconsistent with earlier empirical research; the existence of an EKC for deforestation is undecided. Even though the existence is disputed, it is striking the results show that the relationship between economic growth and deforestation is not even statistically significant.