Does Ecological Footprint Impede Economic Growth?

What is it about?

This paper examines the relationship between income and environmental quality using environmental Kuznets curve (EKC) hypothesis. The hypothesised link is tested using time-series analysis of 22 countries over the period 1961–2011. The degree of environmental impacts of economic activity is measured using ecological footprint (EF) per capita as explanatory variable, while real gross domestic product (GDP) per capita and its quadratic and cubic forms are used as predictor variables in these countries. First, the EKC hypothesis is tested through examining the relationship between EF and GDP using linear, quadratic and cubic functions. Further, the long-run relationship between EF and GDP is investigated using a vector error correction model. It was found that there is a cointegrated relationship between the variables in almost all countries, which was statistically significant, and EKC supported in 10 countries. Additionally, almost all error correction terms are correct in sign and are significant, which implies that some percentage of disequilibria in EF in the previous year adjusts back to the long-run equilibrium in the current year. Therefore, an efficient trade-off between environmental protection and economic benefits should be taken, and EF should be reduced through changing consumption patterns, improving the efficiency of use of resources and cleaner technology choices.

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