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

* Accepted by Yue Ma upon recommendation by Yong Wang.

Abstract

This paper provides empirical information based on the existence of the Environmental Kuznets Curve (EKC) hypothesis for Singapore by applying the autoregressive distributed lag bounds testing approach for the period of 1971–2011. Singapore is a country that has experienced an incredible economic development in the last decades and its contamination has been low in recent years. This hypothesis was tested, obtaining positive results that support it, along with this the Granger causality test showed that the causal variables of CO₂ emissions are the GDP per capita, energy consumption, population density, financial development and trade openness. Empirical results confirm the evidence of EKC hypothesis in both the short-run and long-run. The results suggest that the financial development and trade openness help to reduce the CO₂ emissions. This study hopes to sustain that the existing environmental regulations in the country should continue applying to keep reducing environmental degradation.

Keywords:

• EKC
• Singapore
• financial development
• trade openness

Notes

* Accepted by Yue Ma upon recommendation by Yong Wang.

1. Gross Domestic Product (GDP) at constant prices.

2. Indicator of a recognized and measurable negative impact on the environment, such as CO₂ or N₂O emissions and deforestation.

3. Initially we followed the procedure suggested by Narayan and Narayan (2010), however the expected signs of the variables did not agree with the theory. Furthermore, under this approach the proposed variables are not significant. This suggests that the model of linear approach proposed by these authors does not apply to Singapore.