Faridul, Islam and Muhammad, Shahbaz (2012): Is There an Environmental Kuznets Curve for Bangladesh?
Download (109kB) | Preview
The Environmental Kuznets Curve (EKC) posits that environmental degradation increases at the initial stages, but declines as the economy achieves a certain level of economic growth, measured in per capita income terms. This postulated relation produces an inverted Ushaped curve. The topic has drawn much research attention for both developed and emerging economies. Over the past few decades Bangladesh has been achieving remarkable rates of economic growth. A dense population along with a growing industrial base has raised the specter of a looming environmental crisis. The present study empirically investigates the EKC hypothesis for Bangladesh using data from 1971 to 2010. The Autoregressive distributed lag (ARDL) approach to cointegration has been implemented for a long run relation; and the Granger causality within the vector error correction model (VECM) for the short run dynamics. The series are found to be cointegrated. We find that energy consumption is a major contributor to CO2 emissions. Trade openness improves environment, but urbanization worsens it. Economic growth, energy consumption, trade and urbanization Granger cause CO2 emissions. Knowledge of the existence of an EKC relation can help craft appropriate policies to promote economic growth and identify the turning point, and help preserve the environment.
|Item Type:||MPRA Paper|
|Original Title:||Is There an Environmental Kuznets Curve for Bangladesh?|
|English Title:||Is There an Environmental Kuznets Curve for Bangladesh?|
|Keywords:||EKC, ARDL, VECM, Bangladesh|
|Subjects:||Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q5 - Environmental Economics|
|Depositing User:||Muhammad Shahbaz|
|Date Deposited:||01. May 2012 14:43|
|Last Modified:||14. Feb 2013 13:01|
Akbostanci, E., Türüt-Asik, S., Ipek., T.G., 2009. The relationship between income and environment in Turkey: is there an environmental Kuznets curve? Energy Policy 37, 861- 867.
Alam, M., Huylenbroeck, G.V., 2011. Energy Consumption, CO2 Emissions and the Economic Growth Nexus in Bangladesh: Cointegration and Dynamic Causality Analysis. Presented at the AAS-ICAS Joint Conference, Honolulu, Hawaii, USA, Mar, 31-Ap, 3.
Aldy, J.E., 2005. An environmental Kuznets curve analysis of U.S. state-level carbon dioxide emissions. Environment and Development Economics 14, 48-72.
Andreoni, J., Levinson. A., 2001. The simple analytics of the environmental Kuznets curve. Journal of Public Economics 80, 269-286.
Ang, J. B., 2007. CO2 emissions, energy consumption, and output in France. Energy Policy 35, 4772-4778.
Ang, J. B., 2008. Economic development, pollutant emissions and energy consumption in Malaysia. Journal of Policy Modeling 30, 271-278.
Apergis, N., Payne, J. E. 2009. CO2 emissions, energy usage, and output in Central America. Energy Policy37, 3282-3286.
Beckerman, W., 1992. Growth and the environment: Whose growth? Whose environment? World Development 20, 481-496.
Brock, W. A., Taylor, M. S., 2005. Economic growth and the environment: A review of theory and empirics. In Handbook of Economic Growth, vol. 1B, ed. P. Aghion and S. N.Durlauf. Amsterdam: North-Holland.
Carson, R. T., 2010. The environmental Kuznets curve. Review of Environmental Economics and Policy 4, 3-23.
Carson, R. T., Jeon, Y., McCubbin, D., 1997. The relationship between air pollution and emissions: U.S. data. Environment and Development Economics 2, 433-450.
Chang, C-C., 2010. A multivariate causality test of carbon dioxide emissions, energy consumption and economic growth in China. Applied Energy 87, 3533–3537.
Cole, M., 2004. Trade, the pollution haven hypothesis and environmental Kuznets Curve: Examining the linkages. Ecological Economics 48, 71–81.
Commoner, B.. 1972. The environmental cost of economic development. In Population, environment and resources. Washington, DC: U.S. Government Printing Office.
Coondoo, D., Dinda, S., 2008. The carbon dioxide emission and income: a temporal analysis of cross-country distributional patterns. Ecological Economics 65, 375-385.
Copeland, B. R., Taylor, M. S., 2005. Free trade and global warming: a trade theory view of the Kyoto Protocol. Journal of Environmental Economics and Management 49, 205-234.
Copeland, B., Taylor, M. S., 2001. International trade and the environment: a framework for analysis, NBER Working Paper, No. 8540, Washington.
Dasgupta, S., Laplante, B.,Wang, H., Wheeler, D., 2002. Confronting the environmental Kuznet’s curve. Journal of Economic Perspectives 16, 147–168.
Dhakal, S., 2009. Urban energy use and carbon emissions from cities in China and policy implications. Energy Policy 37, 4208-4219.
Diesendorf, M., 2003. Sustainable development in China. China Connections, January-March.
Dinda, S., 2004. Environmental Kuznets curve hypothesis: A survey. Ecological Economics 49, 431–55.
Dinda, S., Coondoo, D., 2006. Income and emission: a panel data-based cointegration analysis. Ecological Economics 57, 167-181.
Ehrlich, P. 1968. The population bomb. New York: Ballentine. Ehrlich, P., Holden, J., 1971. Impact of population growth. Science 171, 1212–1217.
Fernandez, L., Carson, R. T., eds. 2002. Both sides of the border: Transboundary environmental management issues facing Mexico and the United States. Norwell, MA: Kluwer Academic Publishers.
Fodha, M., Zaghdoud, O., 2010. Economic growth and pollutant emissions in Tunisia: an empirical analysis of the environmental Kuznets curve. Energy Policy 38, 1150-1156.
Frank, R. H., Bernanke, B. S., 2005. Principles of economics, 3rd ed. New York: McGraw-Hill.
Friedl, B., Getzner, M., 2003. Determinants of CO2 emissions in a small open economy. Ecological Economics 45, 133-148.
Gallagher, K. P. 2004. Free trade and the environment: Mexico, NAFTA, and beyond. Palo Alto, CA: Stanford University Press.
Ghosh, S., 2010. Examining carbon emissions-economic growth nexus for India: a multivariate cointegration approach. Energy Policy 38, 2613-3130.
Grossman, G. M., Krueger, A. B., 1991. Environmental impacts of a North American Free Trade Agreement, NBER Working Paper, No. 3914, Washington.
Grossman, G. M., Krueger, A. B., 1993. Environmental impacts of a North American Free Trade Agreement. The Mexico-U.S. Free Trade Agreement”, edited by P. Garber. Cambridge, MA: MIT Press.
Halicioglu, F., 2009. An econometric study of CO2 emissions, energy consumption, income and foreign trade in Turkey. Energy Policy 37, 1156-1164.
Hamilton, C., Turton, H., 2002. Determinants of emissions growth in OECD countries. Energy Policy 30, 63-71.
Haug, A., 2002. Temporal aggregation and the power of cointegration tests: a monte carlo study. Oxford Bulletin of Economics and Statistics 64, 399-412.
He, J., 2008. China's industrial SO2 emissions and its economic determinants: EKC's reduced vs. structural model and the role of international trade. Environment and Development Economics 14, 227-262.
Heil, M. T., Selden, T. M. 1999. Panel stationarity with structural breaks: carbon emissions and GDP, Applied Economics Letters 6, 223-225.
Hill, R.J., Magnani, E., 2002. An exploration of the conceptual and empirical basis of the environmental Kuznets curve. Australian Economic Papers 42, 239–254.
Holtz-Eakin, D., Selden, T.M., 1995. Stoking the fires? CO2 emissions and economic growth. Journal of Public Economics 57, 85–101.
Jalil, A., Mahmud, S., 2009. Environment Kuznets curve for CO2 emissions: a cointegration analysis for China. Energy Policy 37, 5167-5172.
Johansen, S., Juselius, K., 1990. Maximum likelihood estimation and inference on cointegration with applications to the demand for money. Oxford Bulletin of Economics and Statistics 52, 169–210.
John, A., Pecchenino, R., 1994. An overlapping generation model of growth and the environment. Economic Journal 104, 1393–1410.
Jones, L., Manuelli, R., 1995. A positive model of growth and pollution controls. National Bureau of Economic Research Working Paper W5202.
Kuznets, S., 1955. Economic growth and income inequality. The American Economic Review 45, 1-28.
Laurenceson, J., Chai, J. C. H., 2003. Financial reforms and economic development in China. Cheltenham, UK, Edward Elgar.
Lean, H. H., Smyth, R., 2010. CO2 emissions, electricity consumption and output in ASEAN. Applied Energy 87, 1858-1864.
Lee, C-C., Lee, J-D., 2009. Income and CO2 emissions: evidence from panel unit root and cointegration tests. Energy Policy 37, 413-423.
Leow, Y G. 2004. A reexamination of the exports in Malaysia’s economic growth: after Asian financial crisis, 1970-2000. International journal of Management Sciences 11, 79-204.
List, J., Gallet, C., 1999. The environmental Kuznets curve: Does one size fit all. Ecological Economics 31, 409-423.
Liu, Q., 2005. Impacts of oil price fluctuation to China economy. Quantitative and Technical Economics 3, 17-28.
Lopez, R., 1994. The environment as a factor of production: The effects of economic growth and trade liberalization. Journal of Environmental Economics and Management 27, 163- 184.
Lopez, R., Mitra, S., 2000. Corruption, pollution, and the Kuznets environment curve. Journal of Environmental Economics and Management 40, 137-150.
Lucas, G., Wheeler, N., Hettige, R., 1992. The Inflexion Point of Manufacture Industries: International trade and environment, World Bank Discussion Paper, No. 148, Washington.
Maddison, D., Rehdanz, K., 2008. Carbon emissions and economic growth: homogeneous causality in heterogeneous panels. Kiel Working Papers, No: 1437, Kiel Institute for the World Economy.
Managi, S., Hibiki, A., Tetsuya, T., 2008. Does trade liberalization reduce pollution emissions? Discussion papers 08013, Research Institute of Economy, Trade and Industry (RIETI).
Martínez-Zarzoso, I., 2008. The Impact of Urbanization on CO2 Emissions: Evidence from Developing Countries, Ibero America Institute for Economic Research, Universität Göttingen, Germany.
McConnell, K. E., 1997. Income and the demand for environmental quality. Environment and Development Economics 2, 383-399.
Meadows, D. H., Meadows, D. L., Randers, J., Behrens, W. H., 1972. The limits to growth: Report: A report to the Club of Rome’s project on the predicament of mankind. New York: Universe Books.
Narayan, P. K., 2005. The saving and investment nexus for China: evidence from cointegration tests. Applied Economics 37, 1979-1990.
Narayan, P. K., Narayan, S., 2010. Carbon dioxide emissions and economic growth: panel data evidence from developing countries. Energy Policy 38, 661-666.
Nasir, M., Rehman, F. 2011. Environmental Kuznets Curve for carbon emissions in Pakistan: An empirical investigation. Energy Policy 39, 1857-1864.
Nohman, A., Antrobus, G., 2005. Trade and the environmental Kuznets curve: is Southern Africa a pollution heaven? South African Journal of Economics 73, 803-814.
Ouattara, B., 2004. Foreign aid and fiscal policy in Senegal. Unpublished manuscript. University of Manchester, Manchester, UK.
Ozturk, I., Acaravci, A., 2010. CO2 emissions, energy consumption and economic growth in Turkey. Renewable and Sustainable Energy Reviews.
Panayotou, T., 1993. Empirical tests and policy analysis of environmental degradation at different stages of economic development. Working Paper WP238, Technology and Employment Programme. Geneva: International Labor Office.
Perman, R., Stern, D. I., 2003. Evidence for the panel unit root and cointegration tests that the environmental Kuznets curve does not exist. Australian Journal of Agricultural Economics 47, 325-347.
Pesaran, M. H and Pesaran, B., Working with Microfit 4.0: Interactive Econometric Analysis, Oxford University Press 1997. Chapter 7, “Multiple Equation Options”.
Pesaran, M. H., Shin, Y., 1999. An autoregressive distributed lag modeling approach to cointegration analysis. Chapter 11 in Econometrics and Economic Theory in the 20th Century: The Ragnar Frisch Centennial Symposium, Strom S (ed.). Cambridge University Press: Cambridge.
Pesaran, M. H., Shin, Y., Smith, R. J., 2001. Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics 16, 289-326.
Pesaran, M. H., Shin, Y., Smith, RJ., 2000. Structural analysis of vector error correction models with exogenous I(1) variables. Journal of Econometrics 97, 293-343.
Romero-Ávila, D., 2008. Questioning the Empirical Basis of the Environmental Kuznets Curve for CO2: New Evidence from a Panel Stationarity Test Robust to Multiple Breaks and Cross-Dependence. Ecological Economics 64, 559-574.
Say, N.P., M, Yucel., 2006. Energy consumption and CO2 emissions in Turkey: empirical analysis and future projection based on an economic growth. Energy Policy 34, 3870- 3876.
Selden, T. M., Song, D., 1995. Neoclassical growth, the J curve for abatement and the inverted U for pollution. Journal of Environmental Economics and Management 29, 162-168.
Shafik, N., 1994. Economic development and environmental quality: An econometric analysis. Oxford Economic Papers 46, 757-773.
Shafik, N., Bandyopadhyay, S., 1992. Economic growth and environmental quality: Time series and cross country evidence. World Development Working Paper WPS 904. Washington, DC: World Bank.
Shahbaz, M., Lean, H. H., Shabbir, M.S., 2012. Environmental Kuznets Curve Hypothesis in Pakistan: Cointegration and Granger Causality. Renewable & Sustainable Energy Reviews 16, 2947-2953.
Shiyi, C., 2009. Engine or drag: can high energy consumption and CO2 emission derive the sustainable development of Chinese industry. Frontiers of Economic in China 4, 548-571.
Song, T., Zheng, T., Tong, L., 2008. An empirical test of the environmental Kuznets curve in China: a panel cointegration approach. China Economic Review 19, 381-392.
Soytas, U., Sari, U., Ewing, B. T., 2007. Energy consumption, income and carbon emissions in the United States. Ecological Economics 62, 482-489.
Stern, D. I., 2004. The rise and fall of the environmental Kuznets curve. World Development 32, 1419-1439.
Suri, V., Chapman, D., 1998. Economic growth, trade and the energy: implications for the environmental Kuznets curve. Ecological Economics 25, 195-208.
Toda, H.Y. and Yamamoto, T., 1995. Statistical inferences in vector autoregressions with possibly integrated processes. Journal of Econometrics 66, 225-250.
Turner, P., 2006. Response surfaces for an F-test for cointegration. Applied Economics Letters 13, 479-482.
World Bank. 1992. World development report: Development and the environment. Oxford: Oxford University Press.
Wyckoff, A. W., Roop, J. M., 1994. The embodiment of carbon in imports of manufactured products: implications for international agreements on greenhouse gas emissions. Energy Policy 22, 187-194.
Zhang, X. P., Cheng, X-M., 2009. Energy consumption, carbon emissions and economic growth in China. Ecological Economics 68, 2706-2712.