Does Economic Development Have a Causal Relationship With Environmental Degradation?

Abstract

This study estimated the cause-and-effect relationship between economic development and environmental degradation in 92 countries using a Cobb-Douglas production model. The empirical findings found a positive and bi-directional causal association between economic development and environmental degradation across countries. The economic development enhancing factors were key drivers to increase environmental degradation. In contrary, environmental degradation promoting factors such as CO2 intensity, industrialization, urbanization, energy consumption, and agricultural production activities showed a positive impact on economic development. The empirical results also suggested that the impact of a few variables on environmental degradation and economic development differed in high, upper-middle, lower-middle, and low-income countries.