Estimating environmental efficiency of the selected Asian countries: does convergence exist?

Abstract

Environmental degradation has attained much attention from researchers and policymakers at national and global levels. The ever-increasing energy use in production methods is considered one of the fundamental reasons for environmental degradation. The concept of environmental efficiency in the wake of sustainable growth evolved in the last three decades. The present study has been designed to estimate environmental efficiency using the Malmquist-Luenberger productivity index (MLI) using annual data from 43 Asian countries from 1990 to 2019. The MLI is an established econometric approach to estimate cases where input variables are used to get output variables in desirable and undesirable forms. Labor, capital, and energy consumption are input variables, while carbon dioxide (CO2) emissions (undesirable variable) and gross domestic product (undesirable variable) are taken as output variables. The results suggested that, on average, environmental efficiency has decreased by 0.3% over the period in selected Asian countries. Cambodia, Turkey, and Nepal have the highest total factor productivity (TFP) output growth rate on average among 43 Asian countries. These countries are excellent examples of sustainable development that balances environmental protection and efficiency. On the other hand, Kuwait, Mongolia, and Yemen showed the least TFP growth. The study also employed unconditional and convergence tests where the countries' conditional convergence is based on foreign direct investment, population density, inflation, industrialization, and globalization. Some policy implications for Asian countries are also discussed at the end of the study.