Abstract
This study examines the Environmental Kuznets Curve (EKC) hypothesis by adopting a country’s ecological footprint as an indicator of environmental degradation in three East Asian countries: Japan, Korea, and China. During the development process, countries intend to balance between stabilizing export demand and maintaining sustainable economic improvement in the context of deteriorating global warming and climate change. The Environmental Kuznets Curve (henceforth, EKC) was originally developed to estimate the correlation between environment condition and economic development. In this paper, we started from the EKC model and adopted an Error Correction Methodology (henceforth, ECM) to estimate the EKC relationships in Japan, Korea (two developed countries), and China (a developing country) over the period of 1990 to 2013. Besides this, instead of only using Gross Domestic Product (henceforth, GDP), two subdivisions of trade diversification—export product diversification and export market diversification—are introduced as proxy variables for economic development in rectification of the EKC. The results demonstrate that both Korea and Japan satisfy the EKC theory by demonstrating an inverted U-shaped relationship between economic development and ecological footprint, while analysis based on data from China does not display the same tendency. For both export product diversification and market diversification, the more diversified the country’s export is, the bigger its ecological footprint. The policy implications of this econometric outcome are also discussed.
Highlights
In 2018, Korea, Japan, and China experienced a heatwave starting in the middle of July and lasting to the beginning of August
This study examines the Environmental Kuznets Curve (EKC) hypothesis by adopting a country’s ecological footprint as a proxy variable to evaluate the environmental degradation condition
This paper addresses the topic in the context of Japan, Korea, and China and, more importantly, adopted both export market diversification and export product diversification as proxy variables in the EKC model
Summary
In 2018, Korea, Japan, and China experienced a heatwave starting in the middle of July and lasting to the beginning of August. The contradictory opinions on the Environmental Kuznets Curve are due to the fact that the connection between economic development and the environment is both subtle and complex [4] This can be partly explained by three effects which were proposed by Grossman and Krueger, who decomposed the changes in pollution into three fundamental forces: scale effects, composition effects, and technique effects [2]. By taking advantage of a reduced-form EKC model, the current study does not rely on strong theoretical assumptions that are indispensable in models that use the structural form [11,12,13] This present research is supposed to function as a reminder to policy-makers: when it comes to sustainable development, compared with economy volume (which has long been the focus [14,15,16]), economic structures such as export diversification need better attention.
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