Dynamic perspective of the evolution of the environmental Kuznets curve in Ecuador and Mexico

The Kuznets Environmental Curve (EKC) hypothesis posits that environmental degradation intensifies during the early stages of economic development and subsequently declines once a critical income threshold is reached, resulting in an inverted-U-shaped relationship between income and environmental pressure. Ecuador and Mexico provide contrasting empirical contexts for examining these dynamics. The Ecuadorian economy remains heavily dependent on natural resource extraction, particularly oil and mining. In contrast, Mexico's economy is more diversified, combining industrial, service, and agricultural activities, yet it still faces persistent environmental challenges. This study assesses the empirical validity of the EKC in both countries over 2007-2024 by analyzing the relationship between economic growth and CO₂ emissions using spatial autoregressive (SAR) and spatial error (SEM) models. Recent subnational data, transformed in logarithmic form, were used to capture regional heterogeneity and improve the interpretation of spatial economic-environmental linkages. The results suggest that Ecuador remains in the ascending phase of the EKC. In contrast, Mexico exhibits a trajectory that approximates the expected inverted-U shape, indicating that some regions may have reached their tipping point. In addition, spatial dependence in Ecuador is strong and concentrated in extractive areas, while in Mexico, it is weaker and reflects a more diffuse and heterogeneous pattern of emissions