Examining the Impact of Environmental Pollution and Life Expectancy on Economic Growth in the European Union

Abstract

Environmental and demographic changes fall into megatrends that shape contemporary economy and society. The main aim of this paper is to analyze the impact of environmental pollution and life expectancy on economic growth in the European Union. The main research hypothesis states that an increase in environmental pollution and life expectancy leads to an increase in real GDP. Various econometric tests were applied to examine this relationship. Firstly, the existence of long-term relationship between the variables was examined with the use of panel cointegration test. Then, cointegration coefficients in both the long-run and the short-run were estimated. Finally, the improved Granger causality test was conducted to check for causal relationship between the variables. The results indicate that environmental pollution and life expectancy series taken together Granger-cause real GDP. However, other tests indicate there is only a weak impact of the two variables on the real GDP in the European Union.