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Communication

Elasticity Calculation in EKC Literature: A Cautionary Note

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Submitted:

22 November 2019

Posted:

25 November 2019

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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.
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Subject: Business, Economics and Management  -   Econometrics and Statistics
Copyright: This open access article is published under a Creative Commons CC BY 4.0 license, which permit the free download, distribution, and reuse, provided that the author and preprint are cited in any reuse.
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