Analyzing the relationship between economic growth and air pollution under the environmental Kuznets Curve Hypothesis

Abstract

This paper investigates the relationship between economic growth and air pollution under the Environmental Kuznets curve hypothesis (EKC). This paper focuses on OECD countries, which have high levels of economic growth and a high concentration of air pollution monitoring. This paper attempts to see the link between economic growth and air pollution using the data covering 1980 to 2015. We use the panel kink regression to investigate the inverted U-shape curve between income per capita and sulphur dioxide emissions. The results of the test for kink effect indicate that the impact of economic growth on sulphur dioxide emission can be separated into two regimes, while the other variables have a linear relationship with OECD sulphur dioxide emission. The study, thus, constructs the empirical model with the kink effect in economic growth. To confirm the performance of panel kink regression, we employ three models including pooling, fixed effect, and random effect model. The empirical results indicate that there exists both significantly negative and positive relationship between economic growth and Sulphur dioxide for regime 1 or low economic growth, which is income per capita less than 26,338.8417 US$, will causes high sulphur dioxide emissions. Moreover, regime 2 or high economic growth, which is income per capita greater than 26,338.8417 US$. It will causes the reduction of sulphur dioxide emissions. Furthermore, our result shows that there is an inverted U-shape between income per capita and sulphur dioxide emissions. Furthermore, the increase in the population of the OECD member countries has influenced the reduction of sulphur dioxide emissions. It also found that three countries had per capita incomes below 26,338.8417 US$. There is a budget deficit problem, which could not solve economic and environmental problems, including the Hellenic Republic (Greece), the Republic of Turkey, the Republic of Portugal. This study has suggestions as follows. First, reduce government expenditures on welfare state programs. Second, the government should encourage the development of the quality of employers and workers. Last, the government should participate in projects that limit air pollution emissions and support businesses and the people's sector to use the clean energy.