The effects of economic globalization and productivity on environmental quality: evidence from newly industrialized countries.

Abstract

Newly industrialized countries (NICs) have become important contributors of the global environmental deterioration in line with the increases in their share in global output. Exerted efforts towards increasing welfare through global integration and increased productivity have sometimes come at the cost of worsened environmental quality in most of the countries. This study employs augmented mean group (AMG) estimator and investigates the effects of economic globalization, human capital, gross capital formation, and total factor productivity on ecological footprint (EFP) in 11 NICs from 1975 to 2017. The study also contains bootstrap causality tests to obtain causal inference. Empirical results reveal that economic globalization and human capital are negatively correlated with EFP, while GDP per capita manifests a positive and highly significant relationship with EFP. Unit percentage increases in economic globalization index and human capital are found to create .17% and .39% reduction in ecological footprint, respectively. On the contrary, a percentage increase in total factor productivity creates .13% increase in EFP. Estimation results support the pollution halo hypothesis for 11 NICs and confirm the positive effect of human capital on the environment and expose the adverse effects of inadequate regulation. In terms of causality analysis, results reveal unidirectional causality relationships (i) from economic globalization to EFP, (ii) from GDP per capita to EFP, (iii) from trade openness to EFP and from EFP to total factor productivity. Human capital and EFP are found to be in bidirectional causal relationship. The study underlines the importance of global integration and human capital as they are negatively correlated with and causally linked to EFP. Policies that undermine the global economic integration and neglect effective regulations are expected to further aggravate environmental problems in NICs.