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Ashim Kumar Kar
''Pollution and income: Looking into the environmental Kuznets curve in south Asian countries''
( 2023, Vol. 43 No.4 )
This paper examines the validity of the environmental Kuznets curve (EKC) hypothesis in five south Asian countries—Bangladesh, India, Nepal, Pakistan and Sri Lanka over the period of 1981–2018. Employing second-generation panel data econometrics, it evaluates how income per capita and CO2 emissions are linked by taking into account the role of energy consumption and financial development. After applying appropriate testing procedures, the study employed the augmented mean group (AMG), the common correlated effects mean group (CCEMG) estimators and the heterogeneous panel causality tests suitable for cross-sectionally-dependent and heterogeneous panels. The EKC hypothesis is validated for India and Sri Lanka as an inverted U-shaped relation between economic growth and CO2 emissions is found. Heterogeneous panel causality tests confirm four bidirectional causal relationships (CO2 emissions and energy use, CO2 emissions and financial development, economic growth and energy use, and energy use and financial development) and two unidirectional causal relationships (CO2 emissions and economic growth, and financial development and economic growth). Validity of the EKC hypothesis essentially indicates that mostly energy-dependent economic growth can reduce environmental degradation in these countries. So, policy makers should look for alternatives to the traditional energy sources and try to expand renewable energy sources in order to reduce climate change and its impacts.
Keywords: CO2 emissions, Environmental Kuznets Curve, Panel data, Cross-Sectional Dependency, Heterogeneity, South Asian countries
JEL: Q0 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics: General
Q4 - Energy: General
Manuscript Received : May 20 2023 Manuscript Accepted : Dec 30 2023

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