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An integrated specification for the nexus of water pollution and economic growth in China: Panel cointegration, long-run causality and environmental Kuznets curve

Zhang, Chen, Wang, Yuan, Song, Xiaowei, Kubota, Jumpei, He, Yanmin, Tojo, Junji, Zhu, Xiaodong
The Science of the total environment 2017 v.609 pp. 319-328
ammonium nitrogen, chemical oxygen demand, data collection, economic development, oxygen, time series analysis, water pollution, China
This paper concentrates on a Chinese context and makes efforts to develop an integrated process to explicitly elucidate the relationship between economic growth and water pollution discharge—chemical oxygen demand (COD) discharge and ammonia nitrogen (NH₃-N), using two unbalanced panel data sets covering the period separately from 1990 to 2014, and 2001 to 2014. In our present study, the panel unit root tests, cointegration tests, and Granger causality tests allowing for cross-sectional dependence, nonstationary, and heterogeneity are conducted to examine the causal effects of economic growth on COD/NH₃-N discharge. Further, we simultaneously apply semi-parametric fixed effects estimation and parametric fixed effects estimation to investigate environmental Kuznets curve relationship for COD/NH₃-N discharge. Our empirical results show a long-term bidirectional causality between economic growth and COD/NH₃-N discharge in China. Within the Stochastic Impacts by Regression on Population, Affluence and Technology framework, we find evidence in support of an inverted U-shaped curved link between economic growth and COD/NH₃-N discharge. To the best of our knowledge, there have not been any efforts made in investigating the nexus of economic growth and water pollution in such an integrated manner. Therefore, this study takes a fresh look on this topic.