Studying the Effects of Economic and Financial Development as well as Institutional Quality on Environmental Destruction in the Upper-Middle Income Countries
The current study explored the effect of economic
development, financial development and institutional quality on
environmental destruction in upper-middle income countries during
the time period of 1999-2011. The dependent variable is logarithm of
carbon dioxide emissions that can be considered as an index for
destruction or quality of the environment given to its effects on the
environment. Financial development and institutional development
variables as well as some control variables were considered. In order
to study cross-sectional correlation among the countries under study,
Pesaran and Friz test was used. Since the results of both tests show
cross-sectional correlation in the countries under study, seemingly
unrelated regression method was utilized for model estimation. The
results disclosed that Kuznets’ environmental curve hypothesis is
confirmed in upper-middle income countries and also, financial
development and institutional quality have a significant effect on
environmental quality. The results of this study can be considered by
policy makers in countries with different income groups to have
access to a growth accompanied by improved environmental quality.
[1] A. Tamazian, J. Piñeiro, and K.C.Vadlamannati, “Does higher economic
and financial development lead to environmental degradation: Evidence
from BRIC countries”, Energy Policy, vol. 37, pp. 246–253, 2009.
[2] B. Copeland, and M.S. Taylor, “Trade, growth and the environment”, J.
of Eco. Lit., vol. 42, pp. 7–71, 2004.
[3] S. Dasgupta, B. Laplante, H. Wang, and D. Wheeler,. “Confronting the
environmental Kuznets curve”, The J. of Eco. Pers., vol. 16, pp. 147–
168, 2002.
[4] S. Dinda, “Environmental Kuznets curve hypothesis: A survey.
Ecological Eco., vol. 49, pp. 431–455, 2004.
[5] D. Stern, “The rise and fall of the environmental Kuznets curve”, World
Dev., vol. 32, pp. 1419–1439, 2004.
[6] J. Frankel, J. and D. Romer, “Does trade cause growth?” American Eco.
Review, vol. 89, pp. 379–399, 1999.
[7] A. Tamazian, and B. Bhaskara Rao, “Do economic, financial and
institutional developments matter for environmental degradation?
Evidence from Transitional Economies”, Energy Economics, vol. 32, pp.
137–145, 2010.
[8] V. Jensen, “The pollution haven hypothesis and the industrial flight
hypothesis: Some perspectives on theory and empirics”, Working Paper,
Centre for Development and the Environment, University of Oslo, vol.
5, 1996.
[9] L. Jones, and R. Manuelli, “Endogenous policy choice: The case of
pollution and growth”, Review of Economic Dynamics, vol. 4, pp. 369–
405, 2001.
[10] D.H. Meadows, D.L. Meadows, J. Randers, and W. Behrens, “The
Limits to Growth,” New York: Universe Books, 1992.
[11] J.M. Antle, and G. Heidebrink, “Environment and development: theory
and international evidence”, Economic Development and Cultural
Changes, vol. 43(3), pp. 603–625, 1995.
[12] G. Grossman, and A. Krueger, “Economic growth and the environment.
Quart. J. of Economics, vol. 110(2), pp. 352–377, 1995.
[13] T.M. Selden, and D. Song, “Environmental quality and development: Is
there a Kuznets curve for air pollution emission?” J. of Environ. Eco. &
Manage., vol. 27(2), pp. 147-162, 1994.
[14] N.T. Shafik, “Economic development and environmental quality: An
econometric analysis”, Oxford Economic Papers, vol. 46(0), pp.757–
773, 1994.
[15] C.D. Kolstad, and J.A. Krautkraemer, “Natural resource use and the
environment,” In: Kneese, A.V., Sweeney, J.L. (Eds.), Handbook of
Natural Resources and Energy Economics, vol. 3, pp. 1219-1265, 1993.
Elsevier Science Publishers.
[16] H. Hettige, R.E.B. Lucas, and D. Wheeler, “The toxic intensity of
industrial production: Global patterns, trends, and trade policy”’
American Economic Review, vol. 82(2), pp. 478–481, 1992.
[17] N. Birdsall, and D. Wheeler, “Trade policy and industrial pollution in
Latin America: Where are the pollution havens?” J. of Environ. and
Dev., vol. 2(1), pp. 137–149, 1993.
[18] I. Diwan, and N. Shafik, “Investment, technology and the global
environment: Towards international agreement in a world of disparities”
In: Low, P. (Ed.), International Trade and the Environment, World Bank,
Washington, DC., 1992.
[19] European Commission, “The economic aspects of the energy sector in
CIS countries”, Economic Papers N° 327, CASE (Centre for Social and
Economic Research), Directorate-General for Economic and Financial
Affairs, Brussels: Belgium, 2008.
[20] S. Claessens, and E. Feijen, “Financial sector development and the
millennium development goals”, World Bank Working Paper, vol. 89.
The World Bank, 2007.
[21] G. Kumbaroglu, N. Karali, and Y. Arıkan, “CO2, GDP and RET: An
aggregate economic equilibrium analysis for Turkey”, Energy Policy,
vol. 36, pp. 2694–2708, 2008.
[22] S. Dasgupta, B. Laplante, and N. Mamingi, “Pollution and capital
markets in developing countries”, J. of Environ. Eco. & Manage. Vol.
42(3), pp. 310–335, 2001.
[23] S. Dasgupta, J.H. Hong, B. Laplante, and N. Mamingi,“Disclosure of
environmental violations and stock market in the Republic of Korea”,
Ecological Economics, vol. 58(4), pp. 759–777, 2004.
[24] M. Cropper, and C. Griffiths, “The interaction of populations, growth,
and environmental quality”, American Economic Review, vol. 84(2), pp.
250–254, 1994.
[25] N. Stokey, “Are there limits to growth?” International Economic
Review, vol. 39(1), pp. 1–31, 1998.
[26] A. John, and R. Pecchenino, “An overlapping generations model of
growth and the environment”, Economic Journal, vol. 104, pp. 1393–
1410, 1994.
[27] R.D. Congleton, "Political regimes and pollution control”, Review of
Economics and Statistics, vol. 74, pp. 412-421, 1992.
[28] M. Torras, and J.K. Boyce, “Income, inequality, and pollution: A
reassessment of the environmental Kuznets curve”, Ecological
Economics, vol. 25, pp.147–160, 1998.
[29] T. Panayotou, “Demystifying the environmental Kuznets curve: Turning
a black box into a policy tool”, Environment and Development
Economics, vol. 2, pp. 465–484, 1997.
[30] Z. Nasrollahi, and M. Ghafari Gulak, “Economic development and
environmental pollution in member states of the Kyoto protocol and the
countries of southwest Asia”, J. of Eco. Sciences, vol. 9(35), pp.105-126,
2010.
[31] J. Pajavian, and B. Tabrizian, “Studying the relation between economic
growth and environmental pollution using a dynamic simulation model”,
J. of Eco. Studies, vol. 10(3) pp. 175-203, 2011.
[32] M. Salimifar, and J. Dehnavi, “Comparison of environmental Kuznets
curve hypothesis in OECD member countries and developing countries:
Panel data analysis”, J. of Know. & Dev., 17(29), pp. 26-43, 2010.
[33] R. Khoshakhlagh, R. Dalali Esfahani, and N. Yarmohammadian,
“Analysis of environmental Kuznets curve hypothesis using the process
of environmental quality with choosing of household's portfolio”, J. of
Eco. Modeling Res., vol. 6, pp. 85-104, 2012.
[34] K. Sadeghi, Z. Heidari Dad, and S. Mamipour, “Studying the effect of
economic and institutional development on environmental quality in
MENA countries (dynamic panel approach)”. The First International
Conference on Econometrics: Methods and Applications, Sanandaj,
Islamic Azad University, 2013.
[35] D. Behboudi, M. Motafakerazad, and A. Razazadeh (2011) “Effects of
oil prices instability on Iran’s gross domestic product”, J. of Eco.
Energy Studies, pp. 1-33, 2011.
[36] H. Jie, and W. Hua, “Economic structure, development policy and
environmental quality: An empirical analysis of environmental Kuznets curves with Chinese municipal data", Ecological Economics, vol. 76, pp.
128-151, 2012.
[37] A. Levin, C.F. Lin, and C.S.J. Chu, “Unit root tests in panel data:
Asymptotic and finite-sample properties,” J. of Econometrics, vol. 108,
pp. 1-24, 2002.
[38] K. Im, M. Hashem Pesaran, and Y. Shin, “Testing for unit roots in
heterogeneous panels”, J. of Econometrics, vol. 115, pp. 53-74, 2003.
[39] E.W. Frees, “Longitudinal and Panel Data: Analysis and Applications in
the Social Sciences", Cambridge University Press, 2004.
[1] A. Tamazian, J. Piñeiro, and K.C.Vadlamannati, “Does higher economic
and financial development lead to environmental degradation: Evidence
from BRIC countries”, Energy Policy, vol. 37, pp. 246–253, 2009.
[2] B. Copeland, and M.S. Taylor, “Trade, growth and the environment”, J.
of Eco. Lit., vol. 42, pp. 7–71, 2004.
[3] S. Dasgupta, B. Laplante, H. Wang, and D. Wheeler,. “Confronting the
environmental Kuznets curve”, The J. of Eco. Pers., vol. 16, pp. 147–
168, 2002.
[4] S. Dinda, “Environmental Kuznets curve hypothesis: A survey.
Ecological Eco., vol. 49, pp. 431–455, 2004.
[5] D. Stern, “The rise and fall of the environmental Kuznets curve”, World
Dev., vol. 32, pp. 1419–1439, 2004.
[6] J. Frankel, J. and D. Romer, “Does trade cause growth?” American Eco.
Review, vol. 89, pp. 379–399, 1999.
[7] A. Tamazian, and B. Bhaskara Rao, “Do economic, financial and
institutional developments matter for environmental degradation?
Evidence from Transitional Economies”, Energy Economics, vol. 32, pp.
137–145, 2010.
[8] V. Jensen, “The pollution haven hypothesis and the industrial flight
hypothesis: Some perspectives on theory and empirics”, Working Paper,
Centre for Development and the Environment, University of Oslo, vol.
5, 1996.
[9] L. Jones, and R. Manuelli, “Endogenous policy choice: The case of
pollution and growth”, Review of Economic Dynamics, vol. 4, pp. 369–
405, 2001.
[10] D.H. Meadows, D.L. Meadows, J. Randers, and W. Behrens, “The
Limits to Growth,” New York: Universe Books, 1992.
[11] J.M. Antle, and G. Heidebrink, “Environment and development: theory
and international evidence”, Economic Development and Cultural
Changes, vol. 43(3), pp. 603–625, 1995.
[12] G. Grossman, and A. Krueger, “Economic growth and the environment.
Quart. J. of Economics, vol. 110(2), pp. 352–377, 1995.
[13] T.M. Selden, and D. Song, “Environmental quality and development: Is
there a Kuznets curve for air pollution emission?” J. of Environ. Eco. &
Manage., vol. 27(2), pp. 147-162, 1994.
[14] N.T. Shafik, “Economic development and environmental quality: An
econometric analysis”, Oxford Economic Papers, vol. 46(0), pp.757–
773, 1994.
[15] C.D. Kolstad, and J.A. Krautkraemer, “Natural resource use and the
environment,” In: Kneese, A.V., Sweeney, J.L. (Eds.), Handbook of
Natural Resources and Energy Economics, vol. 3, pp. 1219-1265, 1993.
Elsevier Science Publishers.
[16] H. Hettige, R.E.B. Lucas, and D. Wheeler, “The toxic intensity of
industrial production: Global patterns, trends, and trade policy”’
American Economic Review, vol. 82(2), pp. 478–481, 1992.
[17] N. Birdsall, and D. Wheeler, “Trade policy and industrial pollution in
Latin America: Where are the pollution havens?” J. of Environ. and
Dev., vol. 2(1), pp. 137–149, 1993.
[18] I. Diwan, and N. Shafik, “Investment, technology and the global
environment: Towards international agreement in a world of disparities”
In: Low, P. (Ed.), International Trade and the Environment, World Bank,
Washington, DC., 1992.
[19] European Commission, “The economic aspects of the energy sector in
CIS countries”, Economic Papers N° 327, CASE (Centre for Social and
Economic Research), Directorate-General for Economic and Financial
Affairs, Brussels: Belgium, 2008.
[20] S. Claessens, and E. Feijen, “Financial sector development and the
millennium development goals”, World Bank Working Paper, vol. 89.
The World Bank, 2007.
[21] G. Kumbaroglu, N. Karali, and Y. Arıkan, “CO2, GDP and RET: An
aggregate economic equilibrium analysis for Turkey”, Energy Policy,
vol. 36, pp. 2694–2708, 2008.
[22] S. Dasgupta, B. Laplante, and N. Mamingi, “Pollution and capital
markets in developing countries”, J. of Environ. Eco. & Manage. Vol.
42(3), pp. 310–335, 2001.
[23] S. Dasgupta, J.H. Hong, B. Laplante, and N. Mamingi,“Disclosure of
environmental violations and stock market in the Republic of Korea”,
Ecological Economics, vol. 58(4), pp. 759–777, 2004.
[24] M. Cropper, and C. Griffiths, “The interaction of populations, growth,
and environmental quality”, American Economic Review, vol. 84(2), pp.
250–254, 1994.
[25] N. Stokey, “Are there limits to growth?” International Economic
Review, vol. 39(1), pp. 1–31, 1998.
[26] A. John, and R. Pecchenino, “An overlapping generations model of
growth and the environment”, Economic Journal, vol. 104, pp. 1393–
1410, 1994.
[27] R.D. Congleton, "Political regimes and pollution control”, Review of
Economics and Statistics, vol. 74, pp. 412-421, 1992.
[28] M. Torras, and J.K. Boyce, “Income, inequality, and pollution: A
reassessment of the environmental Kuznets curve”, Ecological
Economics, vol. 25, pp.147–160, 1998.
[29] T. Panayotou, “Demystifying the environmental Kuznets curve: Turning
a black box into a policy tool”, Environment and Development
Economics, vol. 2, pp. 465–484, 1997.
[30] Z. Nasrollahi, and M. Ghafari Gulak, “Economic development and
environmental pollution in member states of the Kyoto protocol and the
countries of southwest Asia”, J. of Eco. Sciences, vol. 9(35), pp.105-126,
2010.
[31] J. Pajavian, and B. Tabrizian, “Studying the relation between economic
growth and environmental pollution using a dynamic simulation model”,
J. of Eco. Studies, vol. 10(3) pp. 175-203, 2011.
[32] M. Salimifar, and J. Dehnavi, “Comparison of environmental Kuznets
curve hypothesis in OECD member countries and developing countries:
Panel data analysis”, J. of Know. & Dev., 17(29), pp. 26-43, 2010.
[33] R. Khoshakhlagh, R. Dalali Esfahani, and N. Yarmohammadian,
“Analysis of environmental Kuznets curve hypothesis using the process
of environmental quality with choosing of household's portfolio”, J. of
Eco. Modeling Res., vol. 6, pp. 85-104, 2012.
[34] K. Sadeghi, Z. Heidari Dad, and S. Mamipour, “Studying the effect of
economic and institutional development on environmental quality in
MENA countries (dynamic panel approach)”. The First International
Conference on Econometrics: Methods and Applications, Sanandaj,
Islamic Azad University, 2013.
[35] D. Behboudi, M. Motafakerazad, and A. Razazadeh (2011) “Effects of
oil prices instability on Iran’s gross domestic product”, J. of Eco.
Energy Studies, pp. 1-33, 2011.
[36] H. Jie, and W. Hua, “Economic structure, development policy and
environmental quality: An empirical analysis of environmental Kuznets curves with Chinese municipal data", Ecological Economics, vol. 76, pp.
128-151, 2012.
[37] A. Levin, C.F. Lin, and C.S.J. Chu, “Unit root tests in panel data:
Asymptotic and finite-sample properties,” J. of Econometrics, vol. 108,
pp. 1-24, 2002.
[38] K. Im, M. Hashem Pesaran, and Y. Shin, “Testing for unit roots in
heterogeneous panels”, J. of Econometrics, vol. 115, pp. 53-74, 2003.
[39] E.W. Frees, “Longitudinal and Panel Data: Analysis and Applications in
the Social Sciences", Cambridge University Press, 2004.
@article{"International Journal of Business, Human and Social Sciences:68404", author = "Morteza Raei Dehaghi and Seyed Mohammad Mirhashemi", title = "Studying the Effects of Economic and Financial Development as well as Institutional Quality on Environmental Destruction in the Upper-Middle Income Countries", abstract = "The current study explored the effect of economic
development, financial development and institutional quality on
environmental destruction in upper-middle income countries during
the time period of 1999-2011. The dependent variable is logarithm of
carbon dioxide emissions that can be considered as an index for
destruction or quality of the environment given to its effects on the
environment. Financial development and institutional development
variables as well as some control variables were considered. In order
to study cross-sectional correlation among the countries under study,
Pesaran and Friz test was used. Since the results of both tests show
cross-sectional correlation in the countries under study, seemingly
unrelated regression method was utilized for model estimation. The
results disclosed that Kuznets’ environmental curve hypothesis is
confirmed in upper-middle income countries and also, financial
development and institutional quality have a significant effect on
environmental quality. The results of this study can be considered by
policy makers in countries with different income groups to have
access to a growth accompanied by improved environmental quality.
", keywords = "Economic Development, Environmental
Destruction, Financial Development, Institutional Development,
Seemingly Unrelated Regression.", volume = "8", number = "10", pages = "3344-6", }
