Do Emissions implied in Net Export validate the Pollution Haven Conjecture Analysis of G7 and BRICS countries

Abstract

This study attempts to relook at the pollution haven hypothesis for the G7 and BRICS countries. The empirical analysis begins by detecting the cross-sectional dependence among the country panels for the period 2005-2015 and applies the second-generation unit-root and Westerlund-Edgerton LM bootstrap cointegration tests to precisely determine the long-run equilibrium relationship between emissions embodied in net export and the real GDP, FDI, trade openness, energy consumption and financial development. The result shows a 1% increase in the real GDP and the FDI increasing the emission variable for the BRICS countries by 0.210% and 0.215% respectively, however, for the G7 countries, reducing the emission variable by 0.169% and 0.038% respectively. These findings corroborate the principles of the pollution haven hypothesis, labelling the BRICS countries as pollution haven and adding new argument to restructure the mitigation obligations for the giant emitters.