Income Heterogeneity and Environmental Kuznets Curve in Africa

Adeyemi Ogundipe,Philip O Alege,Oluwatomisin Ogundipe

doi:10.2139/ssrn.2476358

Abstract

The Environmental Kuznets Curve (EKC) hypothesis asserts that pollution levels rises as a country develops, but reaches a certain threshold where pollution begins to fall with increasing income. In EKC analysis, the relationship between environmental degradation and income is usually expressed as a quadratic function with turning point occurring at a maximum pollution level. This study seeks to examine the pattern and nature of EKC in Africa and major income groups according to World Bank classification comprising low income, lower middle income and upper middle income in Africa. In ensuring the robustness of our study; the paper proceeded by ascertaining the nature of EKC in all fifty-three countries of Africa in order to confirm the results obtained from basic and augmented EKC model. The study could not validate EKC hypothesis in Africa (combined), low income and upper middle income but empirical and analytical evidences supports the existence of EKC in lower middle income countries. Likewise, evidences from the robustness checks confirmed the findings from the basic and augmented EKC model. The study could not attain a reasonable turning point as there are evidences that Africa could be turning on the EKC at lower levels of income. Also, there is need to strengthen institutions in order to enforce policies that prohibits environmental pollution and ensure pro-poor development agenda.

Highlights

The concept of Environmental Kuznets Curve (EKC) originates from Kuznets (1955) who hypothesized that income inequality first rises and falls as economic development proceeds but the concept emerged via the path breaking study of Grossman and Krueger on the potential environmental impacts of NAFTA in 1991
6.0 Conclusion and Recommendation The study examines the pattern and nature of EKC in Africa and major income groups according to the World Bank income classification comprising low income, lower middle income and upper middle income in Africa
For the purpose of ensuring reliability of our parameter estimation for policy inferences, we carried out a series of sensitivity checks such as Pesaran residual correlation test, modified wald test for heteroskedasticity and Brensch-Pagan Lagrange multiplier (LM) test; based on these test, our models are void of biases and suitable for policy decision making

Summary

Introduction

The concept of EKC originates from Kuznets (1955) who hypothesized that income inequality first rises and falls as economic development proceeds but the concept emerged via the path breaking study of Grossman and Krueger on the potential environmental impacts of NAFTA in 1991. The Environmental Kuznets Curve (EKC) hypothesized the relationship between per capita income and indicators of environmental degradation. It hereby implies that the environmental impact indicator is an inverted U-shaped function of income per capita (Stern 2009). According to Lomborg (2001) who draws on the World Bank’s World Development Report (1992) which contained one of the first environmental Kuznets curve (EKC) studies, later published by Shafik (1994). The EKC refers to an empirical finding which indicates an inverted U-Shaped relationship between local air pollution and per capita income

Methods

Findings

Discussion

Conclusion