Does environmental degradation shackle economic growth? A panel data investigation on 11 Asian countries

Abstract

Sustainable economic growth needs to be the primary objective of every government, including developing Asian countries, to improve the social welfare of the people. Therefore, to achieve the desirable level of sustainable economic growth, environmental degradation must be controlled without lowering real growth and the well-being of the society. This study empirically investigates the impact of environmental degradation by CO2 emissions on the economic growth of 11 Asian countries between 1990 and 2011. Based on the nature of the data, traditional panel estimation techniques encompassing fixed effects and random effects are employed, in which the results of Hausman's test and other tests show that the use of fixed effects is preferable over the random-effect estimator. Empirical results exhibit that environmental degradation has a significantly negative impact on economic growth. Empirical findings also suggest that environmental degradation should be regulated. Therefore, environmentally enlightened management policies for the decrease of CO2 emissions and fuel consumption by transportation and industries need to be pursued by Asian countries. The adoption of safe carbon emission cut-back policies is a promising path to sustainable economic growth.