Non-linear effect of manufacturing on an environmental pollution index in Latin America.

Abstract

Manufacturing is one of the primary sources of environmental pollution due to the emission of polluting gases and waste generation. This research aims to examine the manufacturing industry's effect on an environmental pollution index in nineteen Latin American countries using non-linear methods. The youth population, globalization, property rights, civil liberties, the unemployment gap, and government stability moderate the relationship between the two variables. The research has a temporal coverage between 1990 and 2017 and uses threshold regressions to verify the hypotheses. In order to obtain more specific inferences, we group countries according to the trade block and geographic region to which they belong. Our findings indicate that manufacturing has limited explanatory power for environmental pollution. This finding is supported by the fact that the manufacturing industry in the region is scarce. In addition, we find a threshold effect on the youth population, globalization, property rights, civil liberties, and government stability. Consequently, our results highlight the importance of institutional factors in designing and applying environmental mitigation mechanisms in developing regions.