Does economic growth affect environmental quality in some East Asian countries?

Abstract

The objectives related to six countries in East Asia (China, Vietnam, Thailand, Malaysia, Japan and South Korea) of the thesis include: to examine the existence of an Environmental Kuznets curve (EKC) for a group of six countries; to find the role of other factors beside income such as trade openness, foreign direct investment (FDI) and population density in determining environmental quality; to recommend general policies for sustainable development in term of environment and economy of six East Asian countries. This chapter gives an overview on theoretical background, which measures relationship of economic growth –environmental quality. The Environmental Kuznets curve (EKC) is mentioned as a foundation of this relationship. A basic general model of the EKC also includes. Following the EKC hypothesis, it shows an overview of literature review resume with various different results. In empirical studies concluded that the EKC is vague but it is meaningful for policy implications. Beside the traditional relation of income-environment, other exogenous factors also reconsider. A resume of some researches is listed in the appendix A. Conceptual framework establishes on the empirical studies and theoretical background of the EKC hypothesis. CO2 emissions per capita is chosen for its global influence. Beside GDP per capita, population density, FDI and trade openness are explanatory variables. The reasons of variable choice and data sources also make clearly. A summary of expected sign and empirical reference for all variables express in table 3.1 and detail definition of variables and data sources are in the appendix B. Besides, econometric model is designed. The author provides an overview of research methodology. In details, Random Effects Models and Fixed Effects Model suggest to apply for balanced panel data set. Hausman test for finding the adequate model with data. In this chapter, we try to answer the questions and reach study’s objectives. A summary of statistic analysis for all variables and description of CO2 emissions capita as well as GDP per capita – CO2 emissions per capita during period 1990-2007 for 6 East Asian countries. CO2 emissions of all countries tend to increase and further in coming years. CO2-GDP relationship seems to be idle and fell in years 2005-2007 for high-income countries (South Korea and Japan) while continuous rising for low-income countries (China, Vietnam, Thailand and Malaysia). Tests for overall significance of variables in equations, choice of the best model (OLS, FEM and REM) as well as time effects in the original and extended model are implemented. The results show that FEM with time effects is best. The EKC exists with turning point of 33,000 US Dollars for the original model and 48,000 US Dollars for the extended model. GDP per capita (positive), GDP2 per capita (negative), population density (negative) affect environmental performance whereas foreign direct investment and trade openness do not cause pollution.