The main purpose of the analysis is to construct a performance measure for countries that considers environmental emissions along with a set of economic variables using a dynamic meta-frontier data envelopment analysis (DEA) approach and to test the validity of the Environmental Kuznets Curve (EKC) using the metric.
The current analysis employs a slack-based dynamic non-concave meta-frontier DEA model with output orientation such that the countries aim to maximize their good output GDP and minimize the bad output of carbon-dioxide (CO2) given the inputs of labor and investment and a dynamic carry-over link of capital stock that acts as an input to the whole production process.
The results provide evidence for moderate eco-efficiency scores, with the global average being 0.8. The eco-efficiency for rich and poor nations is found to be better than for middle-income nations, which indicates environmental snags in the growth processes of middle-income economies and thus validates the presence of a “mildly pessimistic” version of the inverted U-shaped EKC in the world economy over a period of 2001–2018 for 164 nations.
The analysis makes use of a non-concave meta-frontier DEA for different nation clusters that allows for accounting for country differences based on the World Bank income categorization and, at the same time, takes care of infeasible solutions in the common and group-specific frontiers.
