Is there an inverted U-shaped curve? Empirical analysis of the Environmental Kuznets Curve in agrochemicals

Abstract

As the largest contributor to water impairment, agriculture-related pollution has attracted the attention of scientists as well as policy makers, and quantitative information is being sought to focus and advance the policy debate. This study applies the panel unit root, heterogeneous panel cointegration, and panel-based dynamic ordinary least squares to investigate the Environmental Kuznets Curve on environmental issues resulting from use of agricultural synthetic fertilizer, pesticide, and film for 31 provincial economies in mainland China from 1989 to 2009. The empirical results indicate a positive long-run co-integrated relationship between the environmental index and real GDP per capita. This relationship takes on the inverted U-shaped Environmental Kuznets Curve, and the value of the turning point is approximately 10,000–13,000, 85,000–89,000 and over 160,000 CNY, for synthetic fertilizer nitrogen indicator, fertilizer phosphorus indicator and pesticide indicator, respectively. At present, China is subject to tremendous environmental pressure and should assign more importance to special agriculture-related environmental issues.

Keywords

Environmental Kuznets Curve / agrochemical / China

References

[1] Thorburn P J, Biggs J S, Weier K L, Keating B A. Nitrate in groundwaters of intensive agricultural areas in coastal Northeastern Australia. Agriculture, Ecosystems & Environment, 2003, 94(1): 49–58

[2] European Environment Agency (EEA). Source apportionment of nitrogen and phosphorus inputs into the aquatic environment (No.7/2005). Copenhagen: EEA, 2005

[3] Zhang J, Jorgensen S E. Modeling of point and nonpoint nutrient loadings from a watershed. Environmental Modelling & Software, 2005, 20(5): 561–574

[4] Kronvang B, Vagstad N, Behrendt H, Bogestrand J, Larsen S E. Phosphorus losses at the catchment scale within Europe: an overview. Soil Use and Management, 2007, 23(Suppl 1): 104–116

[5] Department for Environment Food and Rural Affairs (DEFRA). Mapping the problem: risks of diffuse water pollution from agriculture. London: DEFRA, 2004

[6] Department for Environment Food and Rural Affairs (DEFRA). Nitrates in water–the current status in England. London: DEFRA, 2007

[7] United States Environmental Protection Agency (USEPA). National water quality inventory. Washington, D C: USEPA. 2009

[8] Chen M, Chen J, Sun F. Estimating nutrient releases from agriculture in China: an extended substance flow analysis framework and a modeling tool. Science of the Total Environment, 2010, 408(21): 5123–5136

[9] Zhang W, Tian Z, Zhang N, Li X. Nitrate pollution of groundwater in northern China. Agriculture, Ecosystems & Environment, 1996, 59(3): 223–231

[10] Liu Y, Chen S, Zhang Y. Study on Chinese agricultural EKC: evidence from fertilizer. Chinese Agricultural Science Bulletin, 2009, 16: 263–267 (in Chinese)

[11] Grossman G, Krueger A B. Environmental impact of North American Free Trade Agreement. NBER Working Paper, No. 3914, 1991

[12] Grossman G, Krueger A B. Economic growth and the environment. Quarterly Journal of Economics, 1995, 110(2): 353–377

[13] Panayotou T. Empirical tests and policy analysis of environmental degradation at different stages of economic development. Working Paper, International Labor Office, Technology and Employment Programme, 1993

[14] Dinda S. Environmental Kuznets Curve hypothesis: a survey. Ecological Economics, 2004, 49(4): 431–455

[15] Brock W A, Taylor M S. Economic growth and the environment: a review of theory and empirics. In: Aghion P, Durlauf S, eds. Amsterdam: Handbook of Economic Growth, 2005, 1(28): 1749–1821

[16] Antler J M, Heidebrink G. Environment and development: theory and international evidence. Economic Development and Cultural Change, 1995, 43(3): 603–625

[17] McConnell K E. Income and the demand for environmental quality. Environment and Development Economics, 1997, 2(4): 383–399

[18] Shortle J S, Abler D. Environmental policies for agricultural pollution control. New York: CAB International Publishing, 2001

[19] Cochard F, Willinger M, Xepapadeas A. Efficiency of nonpoint source pollution instruments: an experimental study. Environmental and Resource Economics, 2005, 30(4): 393–422

[20] Aftab A, Hanley N, Baiocchi G. Integrated regulation of non-point pollution: combining managerial controls and economic instruments under multiple environmental targets. Ecological Economics, 2010, 70(1): 24–33

[21] Managi S. Are there increasing returns to pollution abatement? Empirical analytics of the Environmental Kuznets Curve in pesticides. Ecological Economics, 2006, 58(3): 617–636

[22] Perman R, Stern D I. Evidence from panel unit root and cointegration tests that the Environmental Kuznets Curve does not exist. Australian Journal of Agricultural and Resource Economics, 2003, 47(3): 325–347

[23] Galeotti M, Manera M, Lanza A. On the robustness of robustness checks of the Environmental Kuznets Curve hypothesis. Environmental and Resource Economics, 2009, 42(4): 551–574

[24] Stern D I, Common M S. Is there an Environmental Kuznets Curve for sulfur? Journal of Environmental Economics and Management, 2001, 41(2): 162–178

[25] Oh W, Lee K. Energy consumption and economic growth in Korea: testing the causality relation. Journal of Policy Modeling, 2004, 26(12): 973–981

[26] Copeland B, Taylor S. Trade, growth and the environment. Journal of Economic Literature, 2004, 42(1): 7–71

[27] Unruh G C, Moomaw W R. An alternative analysis of apparent EKC-type transitions. Ecological Economics, 1998, 25(2): 221–229

[28] McCoskey S, Kao C. Comparing panel data cointegration tests with an application of the twin deficits problem. Working Paper, Center for Policy Research, Syracuse University, 1999

[29] McCoskey S, Kao C. A Monte Carlo comparison of tests for cointegration in panel data. Journal of Propagation in Probability and Statistics, 2001, 1(2): 165–198

[30] Mark N, Sul D. Nominal exchange rates and monetary fundamentals: evidence from a small Post-Bretton woods panel. Journal of International Economics, 2001, 53(1): 29–52

[31] Andreoni J, Levinson A. The simple analytics of the Environmental Kuznets Curve. Journal of Public Economics, 2001, 80(2): 269–286

[32] Stokey N L. Are there limits to growth? International Economic Review, 1998, 39(1): 1–31

[33] Jones L E, Manuelli R E. Endogenous policy choice: the case of pollution and growth. Review of Economic Dynamics, 2001, 4(2): 369–405

[34] Israel D, Levinson A. Willingness to pay for environmental quality: testable empirical implications of the growth and environment literature. Contributions to Economic Analysis and Policy. Berkeley: Berkeley Electronic Press, 2004

[35] Stern D I. The Environmental Kuznets Curve. International Society for Ecological Economics, Internet Encyclopedia of Ecological Economics, 2003

[36] Stern D I. Between estimates of the emissions-income elasticity. Ecological Economics, 2010, 69(11): 2173–2182

[37] Wang S, Peng E, Wu G, Zhang T, Zhang J, Zhang C, Yu Y. Surveys of deposition and distribution pattern of pesticide droplets on crop leaves. Journal of Yunnan Agricultural University, 2010, 25(1): 113–117

[38] Yuan P. Environmental economics study on agricultural pollution and its control. Dissertation for the Doctoral Degree, Beijing: Chinese Academy of Agricultural Sciences, 2008 (in Chinese)

[39] Engle R F, Granger C W J. Cointegration and error correction: representation, estimation, and testing. Econometrica, 1987, 55(2): 251–276

[40] Ozturk I, Aslan A, Kalyoncu H. Energy consumption and economic growth relationship: Evidence from panel data for low and middle income countries. Energy Policy, 2010, 38(8): 4422–4428

[41] Pedroni P. Critical values for cointegration tests in heterogeneous panels with multiple regressors. Oxford Bulletin of Economics and Statistics, 1999, 61(S1): 653–670

[42] Li F, Dong S. L X, Liang Q, Yang W. Energy Consumption-Economic Growth Relationship and Carbon Dioxide Emissions in China. Energy Policy, 2011, 39(2): 568–573

[43] López-Pueyo C, Barcenilla-Visús S, Sanaú J, International R. D spillovers and manufacturing productivity: a panel data analysis. Structural Change and Economic Dynamics, 2008, 19(2): 152–172

[44] Levin A, Lin C, Chu C. Unit root tests in panel data: asymptotic and finite-sample properties. Journal of Econometrics, 2002, 108(1): 1–24

[45] Im K S, Pesaran M H, Shin Y. Testing for unit roots in heterogeneous panels. Journal of Econometrics, 2003, 115(1): 53–74

[46] Maddala G S, Wu S. Comparative study of unit root tests with panel data and a new simple test. Oxford Bulletin of Economics and Statistics, 1999, 61(s1): 631–652

[47] Choi I. Unit root tests for panel data. Journal of International Money and Finance, 2001, 20(2): 249–272

[48] Pedroni P. Panel cointegration: asymptotic and finite sample properties of pooled time series tests, with an application to the PPP hypothesis: new results. Working Paper in Economics, Indiana University, 1997

[49] Pedroni P. Panel cointegration: asymptotic and finite sample properties of pooled time series tests with an application to the PPP hypothesis. Economic Theory, 2004, 20: 597–625

[50] Phillips P C B, Moon H R. Linear regression limits theory for non-stationary panel data. Econometrica, 1999, 67(5): 1057–1111

[51] Pedroni P. Fully modified OLS for heterogeneous cointegrated panels. In: Baltagi B H, ed. Advances in Econometrics. Nonstationary Panels, Panel Cointegration and Dynamic Panels. Amsterdam: JAI Press, 2000

[52] Kao C, Chiang M H. On the estimation and inference of a cointegrated regression in panel data. In: Baltagi B H, ed. Advances in Econometrics. Nonstationary Panels, Panel Cointegration and Dynamic Panels. Amsterdam: JAI Press, 2000

[53] Arrow K, Bolin B, Costanza R, Dasgupta P, Folke C, Holling C S, Jansson B O, Levin S, Mäler K G, Perrings C, Pimentel D. Economic growth, carrying capacity, and the environment. Science, 1995, 268(5210): 520–521

[54] Cole M A, Rayner A J, Bates J M. The Environmental Kuznets Curve: an empirical analysis. Environment and Development Economics, 1997, 2(4): 401–416

[55] Park S, Lee Y. Regional model of EKC for air pollution: Evidence from the Republic of Korea. Energy Policy, 2011, 39(10): 5840–5849

[56] de Bruyn S M, van den Bergh J C J M, Opschoor J B. Economic growth and emissions: reconsidering the empirical basis of Environmental Kuznets Curves. Ecological Economics, 1998, 25(2): 161–175

[57] Markus P. Technical progress, structural change and the Environmental Kuznets Curve. Ecological Economics, 2002, 2(3): 381–389

[58] Roca J, Padilla E, Farre M, Galletto V. Economic growth and atmospheric pollution in Spain: discussing the Environmental Kuznets Curve hypothesis. Ecological Economics, 2001, 39(1): 85–99

[59] Magnani E. The Environmental Kuznets Curve: development path or policy results. Environmental Modelling & Software, 2001, 16(2): 157–165

[60] Orubu C O, Omotor D G. Environmental quality and economic growth: Searching for Environmental Kuznets Curves for air and water pollutants in Africa. Energy Policy, 2011, 39(7): 4178–4188

RIGHTS & PERMISSIONS

Higher Education Press and Springer-Verlag Berlin Heidelberg