Preprint Communication Version 1 This version is not peer-reviewed

Elasticity Calculation in EKC Literature: A Cautionary Note

Version 1 : Received: 22 November 2019 / Approved: 25 November 2019 / Online: 25 November 2019 (02:57:12 CET)

How to cite: Mikayilov, J.I.; Hasanov, F.J. Elasticity Calculation in EKC Literature: A Cautionary Note. Preprints 2019, 2019110302 (doi: 10.20944/preprints201911.0302.v1). Mikayilov, J.I.; Hasanov, F.J. Elasticity Calculation in EKC Literature: A Cautionary Note. Preprints 2019, 2019110302 (doi: 10.20944/preprints201911.0302.v1).

Abstract

The polynomial functional specification is widely used in environmental and ecological economics. When different powers of the same variable enter to the specification the elasticity of explained variable with respect to that variable should be obtained using the elasticity formula. Since, in this case the elasticity itself is a function, one need to calculate it at a certain point, to have a general idea about the response of explained variable to the change in explanatory variable. The mainly used point is mean of the variables entering to the elasticity formula. Sometimes, the minimum and maximum points also used for comparison purposes. One should careful in interpreting the response of explanatory variable to the change in the variable entering to the specification with its different powers. This study revisits some methodological points regarding the calculation and interpretation of responses in the above-mentioned cases.

Subject Areas

Environmental Kuznets Curve; polynomial specification; elasticity formula; quadratic function; percentage change

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