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Environmental Degradation and Economic Activites in OECD Countries

Zuhra Tenish, Jelena Z. Minovic, Sandra Jednak, Miloš Parežanin

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Abstract

The relationship between environmental degradation and economic growth has been widely discussed. The aim of this paper is to explore the relationship between environmental pollution and economic activities in the OECD countries for the period 1996-2018. We applied environmental Kuznets \ncurve model extended with foreign direct investment \n(FDI) and trade openness using panel technique to \ntest the existence of environmental Kuznets curve \n(EKC) and pollution haven hypothesis (PHH). Our \nresults support the presence of a EKC and confirm \nthe PHH in OECD countries. Furthermore, the findings reveal that trade openness increase of 1% will \ndecrease carbon emission by 0.31%, while FDI increase of 1% will raise carbon dioxide emission by \n0.013%.

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What this paper is about

The relationship between environmental degradation and economic growth has been widely discussed. The aim of this paper is to explore the relationship between environmental pollution and economic activities in the OECD countries for the period 1996-2018. We applied environmental Kuznets \ncurve model extended with foreign direct investment \n(FDI) and trade openness using panel technique to \ntest the existence of environmental Kuznets curve \n(EKC) and pollution haven hypothesis (PHH). Our \nresults support the presence of a EKC and confirm \nthe PHH in OECD countries. Furthermore, the findings reveal that trade openness increase of 1% will \ndecrease carbon emission by 0.31%, while FDI increase of 1% will raise carbon dioxide emission by \n0.013%.

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Available abstract

The relationship between environmental degradation and economic growth has been widely discussed. The aim of this paper is to explore the relationship between environmental pollution and economic activities in the OECD countries for the period 1996-2018. We applied environmental Kuznets \ncurve model extended with foreign direct investment \n(FDI) and trade openness using panel technique to \ntest the existence of environmental Kuznets curve \n(EKC) and pollution haven hypothesis (PHH). Our \nresults support the presence of a EKC and confirm \nthe PHH in OECD countries. Furthermore, the findings reveal that trade openness increase of 1% will \ndecrease carbon emission by 0.31%, while FDI increase of 1% will raise carbon dioxide emission by \n0.013%.

Key concepts: Kuznets curve, Pollution haven hypothesis, Openness to experience, Foreign direct investment, Environmental degradation, Economics, Haven, Panel data

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