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Income and emission: A panel data-based cointegration analysis

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  • Dinda, Soumyananda
  • Coondoo, Dipankor

Abstract

This paper presents the results of an investigation of the causality issue of income-emission relationship based on time series econometric techniques of unit root test, co-integration and related error correction model for a panel data set. Here, the nature of causality between per capita CO2 emission (PCCO2) and per capita GDP (PCGDP) has been examined using a cross country panel data set covering 88 countries for the period 1960 - 90. Using the panel unit root test procedure of Im et al. (1997) (IPS), we have found that the hypothesis of unit root (i.e., non-stationarity) of the time series of PCGDP and PCCO2 can not be rejected for individual country groups. As both the variables are found to follow I(1) process, we next have performed the panel data co-integration test and finally, we have estimated the ECM (for these country groups for which significant income-emission cointegration was obtained) to explore the nature of dynamics implicit in the given panel data set. Our findings suggest that there is more or less a bi-directional causal relationship between income (PCGDP) and CO2 emission (PCCO2) for Africa, Central America, America as a whole, Eastern Europe, Western Europe, Europe as a whole and the World as a whole. That means, the movement of the one variable directly affects the other variable through a feedback system. Thus, the policy makers should be cautious to make proper decision about the control of emission level.
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  • Dinda, Soumyananda & Coondoo, Dipankor, 2006. "Income and emission: A panel data-based cointegration analysis," Ecological Economics, Elsevier, vol. 57(2), pages 167-181, May.
    • Handle: RePEc:eee:ecolec:v:57:y:2006:i:2:p:167-181
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    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
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