Does income growth relocate ecological footprint?

Abstract

The aim of this paper is to investigate whether countries tend to relocate their ecological footprint as they grow richer. The analysis is carried out for a panel of 116 countries by employing the production and import components of the ecological footprint data of the Global Footprint Network for the period 2004–2008. With few exceptions, the existing Environmental Kuznets Curve (EKC) literature concentrates only on the income-environmental degradation nexus in the home country and neglects the negative consequences of home consumption spilled out. Controlling for the effects of openness to trade, biological capacity, population density, industry share and energy per capita as well as stringency of environmental regulation and environmental regulation enforcement, we detect an EKC-type relationship only between per capita income and footprint of domestic production. Within the income range, import footprint is found to be monotonically increasing with income. Moreover, we find that domestic environmental regulations do not influence country decisions to import environmentally harmful products from abroad; but they do affect domestic production characteristics. Hence, our findings indicate the importance of environmental regulations and provide support for the “Pollution Haven” and “Race-to-the-Bottom” hypotheses.