Is there any link between economic growth and earth's environment? Evidence from 127 countries for the period 2007-2015

• Published in: Journal of environmental economics and policy 2019-04, Vol.8 (2), p.193-208
• Main Authors: Ershad Hussain, M., Haque, Mahfuzul
• Format: Article
• Language: English
• Subjects: economic development; Environmental Kuznets curve; GDP; pollution; random effect model
• ISSN: 2160-6544; 2160-6552
• DOI: 10.1080/21606544.2018.1546234

We investigate the relationship between economic growth and the earth's environment in 127 developing countries spreading all across the globe (Asia, Africa, Americas, Europe, and Polynesia) from 2007 to 2015. We use random effect estimation technique to check for an inverse U-shaped curve, or 'Environmental Kuznets Curve (EKC)'. From our empirical results, we do not find any substantiation for this hypothesis. On the contrary, the empirical evidence suggests that there is an inverse U-shape relationship between environmental performance of a country and the per capita GDP for that country, which implies that, as per capita GDP increases, environmental performance improves but beyond some point, it starts to decrease resulting in an inverse U-shape curve. We alternately use the Growth Rate of GDP and GDP in constant 2010$ to obtain comparable results. We also use the average PM 2.5 air pollution, mean annual exposure (AU) of the World Development Indicators as an index of environmental pollution. When we replace EPI with AU and re-run the random effect model, find no evidence supporting EKC hypothesis, rather a U-shape curve and not an inverted U.