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Revisiting the nexus between economic growth and environment health: an empirical study on 180 nations

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Abstract

Sustainability is considered to be one of the biggest issues in the current time. This study aims to understand the role of sustainability further by revisiting the much-debated and intricate relationship between economic growth and environmental performance and to provide guidance to policymakers. Using a large sample of data from 180 countries over the period from 2002 to 2017 a measure that captures the various aspects of environmental performance, the study performs a test of the Environmental Kuznets Curve (EKC) hypothesis, which defines the relationship between economic growth and environmental deterioration. Controlling for several associated macroeconomic and governance variables, the results suggest that for certain regions, viz. Asia, Eastern Europe, and North America, higher economic growth, as proxied by per capita GDP, has a negative association with environmental performance (measured by Environmental Performance Indices, EPI), indicating that the former may prove detrimental to the later. The results suggest a unidirectional relationship between the two variables and are also robust to endogeneity concerns that are often emphasized in the EKC literature. The study documents similar results for lower-income and lower-middle-income countries. Interestingly, the authors also find that small-sized governments in developing nations have a positive association with environmental performance.

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Fig. 1

Source: Authors’ depiction using EPI database from Yale Center

Fig. 2

Source: Authors’ depiction using EPI database from Yale Center

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Data availability

All data and materials as well as software application or custom code support the current research paper submitted with published claims and comply with field standards. The authors have no objection in sharing research data in concordance with disciplinary norms and expectations, as per the requirements.

All the secondary sources and software used in the current paper are acknowledged and cited in the references appropriately by the authors. Datasets that are assigned digital object identifiers (DOIs) by a data repository are cited in the reference list. Data citations include the minimum information recommended by DataCite: authors, title, publisher (repository name), identifier.

Notes

  1. EPI ranks nations based on environmental concerns in two sub-areas: protection of ecosystems and human health. Further, on the basis of these policy goals, EPI ranks and scores the nation’s performance in eleven issue groups comprising 32 indicators (EPI, 2016 Report).

  2. At an increasing per capita GDP, there is a greater tendency for countries to witness depleting environmental conditions up to a level that is reversed after touching the tipping point.

  3. Due to differences in the variable proxies, data range, methodology used, and national or regional characteristics, the conclusions from these researches have always created substantial disparities.

  4. A proxy to denote the EH and EV of a nation.

  5. The use of panel OLS estimators using fixed or random effects may be problematic due to the correlation between lagged dependent variables (significant in all the model specifications in our empirical analysis) and the error term.

  6. The positive correlation of EPI with population density and urbanization is due to the overall sample dataset considered here.

  7. The study has separately run the static panel modeling too on the chosen sample set. However, the same has not been depicted in the paper as the study’s main focus is to test the “dynamic dependent variable.” The static analysis empirical results corroborate the dynamic panel results.

  8. Transformation refers to a statistical process where a variable’s past value is subtracted from its present value.

  9. Null for AR (2) and Hansen tests should be accepted, and duly satisfied when conducted separately.

  10. Overproduction will be due to the fact that private marginal cost will be lower than social marginal cost.

  11. Leibenstein (1966) has elaborated upon the inefficiencies associated with production activities undertaken by the government sector. The inadequate threat of “Bankruptcy” or “Takeover” of public production of goods and services further induces such inefficiencies.

  12. The dependent variable is EPI. All regressions follow a “two-step estimation procedure” as it produces lower bias coefficients and heteroskedasticity robust standard errors (Windmeijer 2005). All models consider lagged EPI as an endogenous explanatory variable. Parentheses contain heteroskedasticity- robust standard errors clustered at the firm level. The Sargan-Hansen test is a “test of over-identifying restrictions” with the conjecture of validity of instruments used in the study (Sargan 1958; Hansen 1982).

  13. The Right to Know? State Politics of Fracking Disclosure, Review of Policy Research Journal (Vol. 30 Issue 4, p345-365).

  14. Towards global green shipping: the development of international regulations on the reduction of GHG emissions from ships, Int. Environ Agreements (2016) 16:561–577.

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Authors and Affiliations

  1. Department of Commerce, Shyam Lal College (M), University of Delhi, New Delhi, 110032, India

    Megha Jain

  2. International Management Institute, Kolkata, West Bengal, 700027, India

    Tinu Jain

  3. Bennett University/Pahle India Foundation, Noida, U.P., 201310, India

    Palakh Jain

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All authors have made substantial contributions to the conception or design of the work; or the acquisition, analysis, or interpretation of data; or the creation of new software used in the work; drafted the work or revised it critically for important intellectual content; approved the version to be published; and agree to be accountable for all aspects of the work in ensuring that questions related to the accuracy or integrity of any part of the work are appropriately investigated and resolved.

All authors contributed to the study conception and design. Material preparation, data collection, and analysis were performed by Dr. MJ, Dr. TJ, and Dr. PJ. The first draft of the manuscript was written by all authors together. All authors read and approved the final manuscript.

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Jain, M., Jain, T. & Jain, P. Revisiting the nexus between economic growth and environment health: an empirical study on 180 nations. Environ Sci Pollut Res 30, 122550–122579 (2023). https://doi.org/10.1007/s11356-023-30585-7

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