Income-pollution Relationship Research Articles

The simple analytics of the environmental Kuznets curve: a reformulation

PurposeThis paper aims to review the relationship between per capita income and aggregate emission in an economy populated by rational agents. According to the environmental Kuznets curve (EKC) hypothesis, pollution–income relationship is an inverted U-shaped curve. This paper aims to derive that relationship in an endogenous way and extends the relevant literature in an important way.Design/methodology/approachThis paper formulated a general equilibrium model of homogenous population with identical tastes and preferences. Production side is modelled with firms operating in a monopolistically competitive environment. The approach is modelling the economy in an analytical way so that closed form solutions can be achieved. Model simulations have also been performed to get a clear view of results.FindingsThis study shows that increasing returns to scale in abatement technology ceases to be a sufficient condition for the generation of the EKC hypothesis. The general equilibrium structure of the model allows studying the endogenous evolution of income, emissions and prices of the abatement goods in a unified setting.Originality/valueThe paper is novel and original in nature. The results are new in the literature. These results extend and generalise the previous research work in this area in an important way. The sufficient condition that is obtained in this study limits the applicability of EKC in an otherwise identical economy as used in previous literature. Therefore, this paper adds value to the ongoing research related to EKC.

The Role of Education and Income Inequality on Environmental Quality: A Panel Data Analysis of the EKC Hypothesis on OECD Countries

This study examines the impact of education on the pollution–income relationship, controlling for income inequality in 17 European OECD countries over the period 1950–2015. We developed a novel two-stage algorithm, whose first step consists in applying clustering techniques to group countries according to the income inequality temporal pattern. In the second step, we estimate the educational-mitigated EKC hypothesis (Educational EKC) by employing panel regression techniques accounting for endogeneity issues. The clustering findings suggest the existence of high variability in income inequality levels across countries and heterogeneous development patterns. Empirical estimates highlight that, for high income inequality countries, the Educational EKC hypothesis holds, and that the emissions–income elasticity appears to decline when including the schooling level. In the low income inequality cluster, these effects are not clear-cut. For these countries, we propose a different specification of the EKC, which substitutes the income per capita term with the years of schooling. The new specification is statistically validated for both high income inequality and low income inequality countries. In conclusion, we can state that education should be addressed as a crucial cornerstone to shaping the EKC curve.

A dynamic analysis of the income–pollution relationship in a two-country setting

This research explores the presence of the income–pollution relationship in a dynamic two-country setting. We argue that the initial conditions of an economy, as described by its initial stock of physical capital, its total factor productivity, and the degree of environmental awareness, are critical determinants of the income–pollution paths. More importantly, these initial conditions have a more pronounced effect in a world where economies interact with one another and transboundary and global pollutants are affecting more than one country. We show that, in the presence of pollution externalities between two countries, the income–pollution paths these countries follow depend on the stage of development of each country, on their relative and absolute productivities, on the degree of environmental awareness and on the transboundary nature of the pollutants. In a two-country setting with pollution externalities, even more complex patterns may arise compared to single country models, thereby confirming the nonlinear effect of growth on environmental outcomes. It is shown that even small asymmetries span income–pollution relationships that are significantly different than the prescribed inverted U-shaped patterns.

VERIFYING THE ENVIRONMENTAL KUZNETS CURVE HYPOTHESIS IN THE CASE OF INDIA

Growth with sustainability has nowadays become an important thrust area of world economy. The present paper has tried to examine the pollution-income relationship to verify the phenomenon of EKC hypothesis in the case of India for the period of 1978-2014. The application of Johansen cointegration method reveals that there is long run cointegration relationship between the two in the case of India. The study also validates the EKC hypothesis thus giving signal that India should pursue the strategy of “grow now and clean later”, a policy usually adopted by most of the rich countries of the world.Keywords: Environmental Kuznets Curve; Johansen cointegration; India.JEL Classifications: Q56, O53DOI: https://doi.org/10.32479/ijeep.10392

The Environmental Kuznets Curve: A Semiparametric Approach with Cross-Sectional Dependence

This paper proposes a new approach to examine the relationship between CO2 emissions and economic developing. In particular, we propose to test the Environmental Kuznets Curve (EKC) hypothesis for a panel of 24 OECD countries and 32 non-OECD countries by developing a more flexible estimation technique which enables to account for functional form misspecification, cross-sectional dependence, and heterogeneous relationships among variables, simultaneously. We propose a new nonparametric estimator that extends the well-known Common Correlated Effect (CCE) approach from a fully parametric framework to a semiparametric panel data model. Our results corroborates that the nature and validity of the income–pollution relationship based on the EKC hypothesis depends on the model assumptions about the functional form specification. For all the countries analyzed, the proposed semiparametric estimator leads to non-monotonically increasing or decreasing relationships for CO2 emissions, depending on the level of economic development of the country.

Analysis of Household Energy Use and CO2 Emission using Environmental Kuznets Curve

This study examined the environmental Kuznet’s curve based on the household energy use and pollution of carbon dioxide in Nigeria as a means of identifying efficient energy for a sustainable environment. Secondary data sets obtained from National Bureau of Statistics on the General Household Survey (2010-11, 2012-13, 2015-16 and 2018-19) were utilized. The study employed descriptive statistics, Consumer Lifestyle Approach and the Econometric specification for income-pollution models. The result showed that the use of diesel and kerosene were declining over the years while Liquefied Petroleum Gas (LPG), electricity and petrol recorded an increasing pattern. However, charcoal and fuelwood usage experienced some decline for the first three years of the survey and rose in 2019. The results also revealed that the total of 105674, 76329, 70006 and 47586 kg of carbon dioxide were emitted monthly based on the four data sets used respectively. With a total of 296064 and 303037 kg for rural and urban households respectively and on the average a household emits a total of 19 kg of carbon dioxide. With regards to the pollution-income relationship, the coefficients of income(y), (y2) and (y3) were all negative, although significant at 1% levels. Indicating that the Kuznets hypothesis was partially applicable to the Nigerian households, while educational level and sex were found to be negative but significant at 1% levels. On the contrary, the family size was positive and significant at 1% level but age of the household head was insignificant determinant of carbon dioxide emission. The paper recommended that the Nigeria government should improve electricity supply, LPG and the income of the households.

CO2 emissions and sustainable economic development: New evidence on the role of human capital

AbstractThe empirical literature testing the Environmental Kuznets Curve hypothesis reports mixed results on the existence of this relationship. This study argues that the effects of economic development on CO2 emissions are contingent upon the level of human capital. In the beginning, when human capital starts increasing from its low levels, more education accelerates the use of non‐renewable resources and increases pollution emissions. However, when certain threshold levels of schooling are traversed, further enrollments reduce CO2 emissions by promoting environmental awareness and facilitating the use of environment friendly technologies. To test these competing possibilities, we rely upon an innovative threshold technique where income–pollution relationship is piecewise linear with human capital serving as regime switching trigger. Our empirical findings using a large sample of 122 economies over the period 1980 to 2014 support the contingency effects of human capital in the income–environment relationship. These results are also supported by our findings from cross‐sectional regressions in the presence of multiplicative interaction term of income and human capital. Based on these results we argue that an increase in education is necessary for reducing the environmental degradation and ensuring the sustainability of economic development.

An Empirical Analysis of the Environmental Kuznets Curve for River Water Pollution in Uttar Pradesh

This article attempts to test the environmental Kuznets curve (EKC) hypothesis for river water pollution for a panel dataset of 15 districts of Uttar Pradesh. There are sharp socio-economic and demographic variations within India; therefore, a regional study can give a better insight into the pollution income relationship of a specific region compared to a national study. Panel unit root tests, Pedroni cointegration test and fully modified ordinary least square (FMOLS) method have been employed to investigate EKC for two water pollutants—biochemcial oxygen demand (BOD) and total coliform (TC). Findings suggest that there is no evidence of an EKC for BOD, but results validate the existence of an EKC for TC. The Swachha Bharat Mission launched in 2014 aimed at eliminating open defecation and increasing toilet access in rural India can be a credited for the reduction in TC levels since 2014. The success of NAMAMI Gange so far seems to be localised to regions where political thrust has expedited the completion of projects.

How effective is government spending on environmental protection in a developing country?

PurposeThe objective of this paper is twofold as follows: first, it explores the relationship between economic growth and the environment in the context of the environmental Kuznets curve (EKC) in Iran, as a semi-industrialized and largest developing economy in the Middle East. Second, it investigates the effectiveness of government spending on environmental protection.Design/methodology/approachThe paper uses the ecological footprint data and an ARDL model to gauge the income and government spending effects on environmental improvement. This method avoids the problems associated with using the regression including a squared income.FindingsThe results find no evidence for a turning point in the income–pollution relationship and no significant impact of government spending on reducing footprint. We conjecture that the structure of the economy and the weak institutional quality may explain the results.Research limitations/implicationsThis includes limited time series data on institutional quality indices and their small variations over time.Practical implicationsCreating an environmental fund using the oil windfall and applying environmental tax/subsidies policies will help address increasing environmental challenges in energy-rich developing countries. Education and public awareness about environmental problems and their impacts on the standard of living are also nonexpensive but effective ways to increase citizen's engagement towards improving environment.Social implicationsThe EKC may take different forms in various countries depending on their economic structure and institution qualities.Originality/valueThe paper uses the ARDL method rather than a commonly used regression with a squared income to estimate the EKC. It also uses ecological footprint as a measure of environmental damage. Exploring government effectiveness in managing public good is also novel in the empirical literature.

Economic Growth and Environmental Degradation When Preferences are Non-homothetic

We study the dynamics of pollution in an economic growth model with non-homothetic preferences. We characterize the forces that may drive the evolution of the income-pollution relationship along the development process. In particular, we disentangle the standard accumulation mechanism, which determines the intertemporal allocation of pollution, from a mechanism based on the non-homotheticity of preferences, which leads the intratemporal allocation of expenditure between consumption and pollution abatement to depend on income. As the economy develops and aggregate income grows up, the fraction of income devoted to abatement increases if the income elasticity of abatement is larger than unity. In this case, the pollution may decrease with income even when the elasticity of pollution with respect to abatement is smaller than the elasticity of pollution with respect to emissions. We numerically illustrate how this demand-based mechanism determines the dynamic relationship between pollution and aggregate income.

Tunneling Through the EKC: Disentangling the Impact of NRCP in India

The relationship between income and environmental pollution has been a major area of research. We have estimated the EKC for water pollutants for 16 major states of India for the time period 1990- 2014. We provide evidence on effectiveness of national river conservation plan (NRCP, 1995) in reducing the pollution across major Indian rivers. Evidence suggests that on average NRCP decreased the level of pollution in major rivers. Apart from the average impact, a policy such as NRCP can also change turning points by changing income pollution relationship. We use numerical derivatives to establish the change in turning point due to change in the value of the coefficients associated with higher order income terms (it is not possible analytically) and provide statistical evidence of change in turning point. There are three effects of institutional changes possible in case of EKC, average effect, change in income pollution relationship (change in turning point) or both of them. We explain how the adverse impacts of change in turning point due to change in income pollution relationship (which we find in case of one of the pollutant) can be compensated by large significant negative average effects of institutional changes.

Environmental awareness and environmental Kuznets curve

We study the impacts of environmental awareness on environmental quality and income-pollution relationship. For our theoretical analysis, we examine a non-cooperative transboundary pollution control game between a less developed country (LDC) and a more developed country (MDC), and find that a higher level of environmental awareness by the government and citizens of the LDC has comprehensively beneficial effects on environmental policy and regional environmental quality. It also flattens the environmental Kuznets curve (EKC) and shifts it to the left. Our empirical findings confirm the theoretical projections. In the LDCs, environmental awareness plays an influential role in determining environmental expenditure; also, EKCs arrive at the peaks earlier, in countries where the public has higher environmental awareness.

Economic growth and environmental degradation in Vietnam: Is the environmental Kuznets curve a complete picture?

Based on a sample of 1974–2016 annual data of Vietnam, we show that the EKC does not exist in the short run but only in the long run. However, the N-shape describes better the long-run income-pollution relationship. This implies that Vietnam can expect a temporary reduction in CO2 emissions at a given stage of economic growth. However, this will be followed by a further increase of CO2 emissions after reaching another income turning point. The Vietnamese government should thus focus on long-term economic and environmental strategies. A robustness check shows that these results are not impacted by the variables' selection.

One shape does not fit all: A nonparametric instrumental variable approach to estimating the income-pollution relationship at the global Level

Abstract We examine the relationships among water pollution, income, and political institutions using country-level global water quality data over the period 1980 to 2012. In order to address concerns about the highly nonlinear relationship between pollution and income, the endogeneity of income, and the discrete nature of political variables, we use a nonparametric instrumental variable approach that allows for the inclusion of continuous and discrete variables to identify these relationships. Results indicate an inverted-U shaped relationship between pollution and income consistent with an environmental Kuznets curve for one pollutant (lead), a cubic shape for three pollutants (nickel, mercury, and fecal coliform), and more highly nonlinear relationships for many of the other pollutants. For several stock pollutants (nickel, mercury, and arsenic), we find that pollution levels may continue to increase at higher levels of income, suggesting that stock pollutants may continue to accumulate in productive high-income countries even when marginal emissions have been reduced. We also find suggestive evidence that levels of pollutants resulting from industrial activity (e.g., chemical oxygen demand) may increase with income while those that are more driven by residential activity and population levels (e.g., fecal coliform) do not. By estimating a nonparametric relationship between pollution and political institutions and by accounting for the categorical nature of the political variables, we are able to detect a nonlinear relationship between pollution and political institutions as well, which for some pollutants is an inverted-U shaped curve.

Let the data speak: semiparametric evidence on the environmental Kuznets curve in Africa

This paper revisits the environmental Kuznets curve hypothesis and applies a flexible semi-parametric panel fixed effects technique to identify the true shape of the income-pollution relationship for a sample of 49 African countries for the period 1990–2010. Compared with standard panel data techniques which yields different conclusions, the former show that the income-pollution nexus is non-monotonically increasing and decreasing for $$\hbox {CO}_2$$ and $$\hbox {PM}_{10}$$ emissions respectively. Hence, the effect of economic growth differs with each atmospheric pollutants and is not sufficient for improving environmental quality. There is need for policies that emphasizes sustainable economic growth and the use of cleaner energy sources.

ENVIRONMENTAL KUZNETS CURVE FOR CO2AND NOX EMISSIONS: A CASE STUDY OF INDIA

The causal relationship between economic growth, environmental consumption and degradation has been a subject of debate for last few decades. In this regard, the inverted U-shaped Environmental Kuznets curve (EKC) demonstrates (pollution-income relationship) that initially the environmental degradation and pollution surpass the level of income per capita; however this trend reverses since at the higher income levels economic growth initiates environmental improvement due to technological change that allows cleaner input to be used in the production of goods and services. This debate is reminiscent of the one that resulted from the Club of Rome Report (Meadows et al 1972).Unresponsive regarding environmental protection and endeavour to speed up economic growth had not only kept environmental considerations as secondary objectives in policy making in these countries but also threatened their sustainable future. This paper reviews the empirical studies that have examined the relationship between environmental degradation and economic growth. It also underlines other econometric and methodological problems with estimates of the EKC. Based on secondary data with reference to India, an empirical econometric model is tested to analyze the relationship between NOx, CO2 (in per capita metric tones) and GDP(per capita). The implications for environmental policy with particular reference to a developing country like India are addressed. Key Words: CO2, Environmental Kuznets curve (EKC); Economic growth; Environmental degradation; GDP per-capita; India,NOx. JEL classification: N50, O13, Q00, Q20, Q50.

Water pollution and income relationships: A seemingly unrelated partially linear analysis

We used a seemingly unrelated partially linear model (SUPLM) to address a potential correlation between pollutants (nitrogen, phosphorous, dissolved oxygen and mercury) in an environmental Kuznets curve study. Simulation studies show that the SUPLM performs well to address potential correlation among pollutants. We find that the relationship between income and pollution follows an inverted U-shaped curve for nitrogen and dissolved oxygen and a cubic shaped curve for mercury. Model specification tests suggest that a SUPLM is better specified compared to a parametric model to study the income-pollution relationship. Results suggest a need to continually assess policy effectiveness of pollution reduction as income increases. This article is protected by copyright. All rights reserved.

Foreign Direct Investments and the Environmental Kuznets Curve: New Evidence from Chinese Provinces

By employing a panel smooth transition regression (PSTR), this article analyzes the impacts of economic growth and foreign direct investment (FDI) on air pollutant emissions. The results reveal the regime-switching effects in the income-pollution relationship as well. Specifically, an inverted-U shape is found in the relationship between per capita income and two air pollutant emissions, soot and dust, which confirms the environmental Kuznets curve (EKC) hypothesis. Significant influence of FDI on EKC relationships is found, which provides the evidence that the pollution haven hypothesis holds to some extent.

Population growth and the environmental Kuznets curve

This paper provides a specific application of the environmental Kuznets curve (EKC) in order to explain the effect of population growth on the environment. The main purpose is contributing to enhance the connection between theoretical and empirical analysis. We develop an overlapping generations (OLG) model that featured with an inverted U-shaped relationship between pollution emission and income and we examine the effect of population growth on this relationship. Simulations illustrate the model's predictions that positive population growth makes the EKC steeper and have higher peak, but it does not fundamentally change the pollution–income relationship. The econometric analysis finds evidence supporting our model's predictions using Chinese data at the province level.

The Environmental Kuznets Curve and the Structural Change Hypothesis

We provide a very simple macroeconomic investigation of the role that structural changes might play in generating inverted U-shaped income–pollution relationships. Differently from previous research which mainly focuses on empirical, static or general equilibrium models, we develop a standard balanced growth path (BGP) analysis. We show that along the BGP equilibrium an inverted U-shaped income–pollution relationship may occur as a response to structural changes, but whether this is the case or not it will crucially depend upon the magnitude of a production externality parameter. Moreover, we show that the negative relationship between income and pollution can only be a transitory phenomenon, and in the long run pollution will increase as income rises, generating overall an N-shaped pattern.