Testing the environmental Kuznets curve hypothesis on land use. The case of Romania

The aim of the present study is to test empirically the Environmental Kuznets Curve (EKC) hypothesis for 42 Romanian counties over the 2000-2014 period. Specifically, we investigate the existence of an inverted U-shaped curve relationship between residential built-up land and economic development in a low-income EU country undergoing rapid and profound transition. We do so by making innovative use of spatial panel econometric techniques. Contrary to our expectations, the results indicate an inverted EKC, implying that higher levels of residential built-up area occur for higher levels of wealth. Moreover, we find that the built-up land in Romania mainly reflects processes of urban expansion, such as sprawl or suburbanization, that may have harmful environmental and social consequences. Spatial spill-overs in terms of built-up land arise and spread, albeit to a limited extent, to neighbouring locations. These findings are of potential significance for policy makers, because they highlight the need for coordination among neighbours. Furthermore, strengthening the institutional framework and local tax management, and planning urban regeneration better could curb and even reverse the extensive built-up land expansion and real estate speculation.