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Investigating the Environmental Kuznets Curve (EKC) Hypothesis and Economic Growth in Iran's Industrial Provinces Based on the DOLS Approach

Document Type : Original Article

Authors

1 Economic Department, ٍFaculty of Humanities and Law.Islamic Azad University Isfahan (Khorasgan) Branch

2 Full Professor, Department of Economics, Isfahan (Khorasgan) Branch, Islamic Azad University, Isfahan, Iran

3 Associate Professor, Department of Economics, Isfahan (Khorasgan) Branch, Islamic Azad University, Isfahan, Iran

Abstract

Introduction: Over a long period of time, there can be a direct correlation between economic growth and environmental quality, a negative correlation, or a combination of the two. Many studies and research have been conducted on this topic (the relationship between economic growth and environmental quality). In the field of sustainability economics, one of the most significant debates involves the effects of economic growth on the environment. Currently, fossil fuels are being used more and more intensively due to the industrialization of our societies. The combustion of these fuels results in the emission of a wide range of toxic and hazardous substances. This has a detrimental effect on the environment, including global warming and climate change.  As a result of this study, three different forms of real GDP per capita have been examined: an inverted U shape, an N shape, and a combination of each of these three shapes. In terms of the volume of pollutants emitted from the industrial sector, the power of two and the power of three were calculated for 12 industrial provinces of the country during the period of 1376-1399 using the long-term panel econometric method of dynamic least squares. The results of the estimations are such that the environmental assumptions of Kuznets are valid for all three pollutants. In addition, an increase in real GDP per capita is associated with an increase in pollution. After reaching the maximum, the amount of pollution decreased. Finally, with a further increase in production, the rate of pollution decreased. According to the DOLS technique, the upward trend of increasing pollution continues, and the N-shaped curve has been confirmed by specifying the second and third-degree relationships of economic growth in 12 industrial provinces during the specified period by using the DOLS technique.
Materials and Methods: The first objective of this study is to investigate the mean of the variables using panel unit root tests. After that, with the Kao cointegration test, we determine whether or not there is a cointegration relationship between the variables. To conclude, the coefficients of variables have been estimated using the fully modified least squares method and dynamic least squares.
Results: An inverted U and an N shape of GDP were examined in three different ways; at first glance, the power of two and the power of three affected pollution levels in the industry sector. Using long-term panel econometric methods of dynamic least squares, 12 industrial provinces between 1376 and 1399 will be examined for carbon dioxide, sulfur dioxide, and sulfur trioxide. In all three cases, the estimation results are such that Kuznets' assumptions about the environment are valid.
Discussion: As a result of the estimation of the models using the DOLS method in the investigation of Kuznets' environmental curve, and by specifying economic growth relationships at the second and third degree in 12 industrial provinces in the country during the selected period, the N-shaped curve has been confirmed. The inclusion of the urbanization variable in the model has led to an increasing correlation between pollution and urbanization. The consumption of fossil fuels has increased as a result of urbanization, resulting in a rise in air pollution. In the ascending part of the Kuznets environmental curve, Iran is clearly in the first stage of pollution. Furthermore, it is at the beginning of the relationship between production and pollution. Additionally, we will witness long-term pollution accumulation in the environment as pollution in Iran continues to grow at a positive rate.

Keywords

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Environment and Interdisciplinary Development
Volume 7, Issue 77
November 2022
Pages 87-63
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