IS ECONOMIC GROWTH AND INDUSTRIAL GROWTH THE REASON FOR ENVIRONMENTAL DEGRADATION IN SAARC COUNTRIES

Atif Khan Jadoon,Sania Akhtar,Sarvjeet Kaur Chatrath,Saima Liaqat,Syeda Azra Batool,Ambreen Sarwar

doi:10.32479/ijeep.11769

Abstract

In the last four decades, the developing countries have built a heavy industrial base which is seen as a threat to the environment. The trade liberalization policies of the SAARC counties led them to increase the production for domestic use and exports. This increase in industrial output is a real threat to environmental degradation as the industrial share is quite significant in the GDP of the SAARC countries. The present study is designed to check the existence of the Environmental Kuznets Curve (EKC) hypothesis and then use industry output as a regressor to see how it is affecting the environment. The panel regression models are used for estimation by taking data from 1980 to 2018. The results are obtained by using Newey-West standard robust errors. The results suggested that there exists a U-shape relationship between economic growth and Carbon Dioxide (CO2) while an inverted U-shape relationship is found between industrial growth and CO2. Furthermore, a unidirectional causality was observed between industrial growth, human capital, energy consumption, and CO2 while bidirectional causality was observed between urbanization and CO2. The present study suggests that there is a need to adopt environmental protection policies related to the industrial sector in the SAARC region.Keywords: Economic Growth, Idustrial Growth, Environmental DegradationJEL Classifications: Q43, Q54, R11DOI: https://doi.org/10.32479/ijeep.11769

Highlights

The increase in industrial production and advancement in technology has raised the standards of living of the people and the Gross Domestic Production (GDP) of the world
The traditional Environmental Kuznets Curve (EKC) hypothesis was tested by taking GDP per capita and the results showed that EKC is U-shaped for SARRC countries
The null hypothesis of the Hausman test states that the Random Effects Models (REM) is appropriate while the alternative hypothesis stated that Fixed Effects Model (FEM) is appropriate for the data

Summary

Introduction

The increase in industrial production and advancement in technology has raised the standards of living of the people and the Gross Domestic Production (GDP) of the world. The major source of energy comes from non-renewable fossil fuels which are largely used for industrial production in developing countries (Wang et al, 2020). In this contemporary era, growth-led policies are creating an alarming situation for global warming (Tsaurai, 2018). The quadratic relationship by using the EKC hypothesis shows an inverted U-shape curve between both variables, which shows that at the initial stage of EG, the ED increases while at later stages, ED decreases due to the advanced technology and use of renewable energy sources (Mahmood et al, 2019; Sultan et al, 2021). The present study is designed to check the EKC hypothesis by taking EG and industrial growth as independent variables

Methods

Results

Conclusion