Environmental impacts of economic growth: a dynamic panel threshold model

Abstract

The paper uses the environmental Kuznets curve (EKC) theory to study the environmental impact
of economic growth in 17 Asian countries in the period 1996-2019 and at the same time search for the
income threshold which causes a change in direction of impact. A dynamic panel threshold regression
model is used. The findings show that economic growth has an inverted U-shaped nonlinear effect on
environmental degradation. Accordingly, economic growth increases the impact on degradation when GDP
per capita is low, but when it exceeds the threshold point (12487 USD thousand/person/year), economic
growth helps to improve environmental quality. When comparing the difference in impact between the
group of developed and developing countries, our results again confirm these findings. This result provided
evidence that the EKC hypothesis exists in Asian countries. In addition, energy consumption, foreign direct
investment, trade openness, and institutional quality significantly impact CO2 emissions. Some policy
implications are suggested to reduce environmental degradation and promote sustainable economic
development in Asia based on the research results.