Economic Structural Transformation and CO2 Emissions in Asian Countries: Homogeneous Vs. Heterogeneous Estimators

Abstract

This study examines the impact of structural transformation on environmental pollution in selected Asian countries for the years 1990-2016. This transformation decomposes into sectoral compositions, urbanization, and demographic changes in Stochastic Impacts by Regression on Population, Affluence and Technology (STIRPAT) model and estimates using the panel model that under the homogeneous slope assumption and also accounts for heterogeneity across countries. The study has sorted out the problem of cross-sectional as well as the heterogeneity in Asian countries and suggests the prime catalyst of 𝐶𝑂2 emissions is the brisk industrialization, urbanization rate and economic development. Further, this finding also support the existence of an inverted-U curve between affluence level and 𝐶𝑂2 emissions and urbanization and 𝐶𝑂2 emissions, implying that at a higher scale of the economy and higher urbanize level, 𝐶𝑂2 emissions decrease but this remained inconclusive in the heterogeneous panel. This study provides policymakers with clear picture on how to promote growth in achieving the sustainability development policy.