A spatial econometric analysis of the environment Kuznets curve and pollution haven hypothesis in Sub-Saharan Africa

Abstract

The aim of this study is to test the environment Kuznets curve (EKC) and pollution haven (PH) hypotheses in Sub-Saharan Africa (SSA). An important methodological point that has been over-looked by many studies is that environmental quality is not only correlated in time but also in space. For this purpose, the study applies spatial panel econometric analysis using a balanced panel of 35 SSA nations from 2002 to 2015 to examine the EKC and PH hypotheses. Both spatial interdependence and individual heterogeneity are accounted for through the application of the spatial Durbin model (SDM) so as to avoid potential bias and inefficiencies in parameter estimates. As proxies for environmental quality, panel data aggregates on carbon dioxide (CO2) emissions and the depletion of natural resources are utilised. The findings offer proof for the EKC theory about the depletion of natural resources in SSA. The EKC theory, however, does not apply to CO2 emissions. Moreover, the study finds that the positive scale effect of trade outweighs the negative technique effect of trade, which indicates that trade liberalisation has a negative effect on both environmental quality indices. This discovery supports the PH theory. The study also demonstrates positive spatial spill-over for natural resource depletion between neighbouring countries and negative spatial spill-over for carbon dioxide emission between close countries.

The Dynamic Relationship Between Foreign Direct Investment and Carbon Emissions in Southern Africa and West Africa Regions: The Intervening Role of Financial Development

“…Moreover, the correlation between foreign direct investment and carbon emissions has been extensively examined, yet a definitive connection between the two has not been established or substantiated by empirical evidence (Jahanger and Usman, 2023; Huang et al, 2023). The Pollution Haven and Factor Endowment hypotheses posit that in countries with lenient environmental regulations, dominant multinational corporations frequently exploit this situation by establishing themselves through foreign direct investment, consequently leading to environmental pollution (Li et al, 2022;Jeetoo & Chinyanga, 2023;Apergis et al, 2023). Consequently, foreign direct investment will lead to a decline in environmental quality.…”

“…To improve the accuracy of the estimate, four macroeconomic control variables are used: trade openness, financial openness, economic growth, and financial development. The Pollution Haven and Factor Endowment hypotheses posit that in countries with lenient environmental regulations, dominant multinational corporations frequently exploit this situation by establishing themselves through foreign direct investment, consequently leading to environmental pollution(Li et al, 2022;Jeetoo & Chinyanga, 2023;Apergis et al, 2023).…”