Is the Environmental Kuznets Curve Hypothesis Valid in South Asian Countries? Panel Evidence (1981-2015)

Abstract

This study examines the impact of per capita income, its square, forest area, FDI inflows, population density, urbanization, and trade openness on CO₂ emissions in South Asian countries. Using secondary data from the World Development Indicators (WDI) for 1981–2015, the analysis employs ADF tests for stationarity and the ARDL bounds testing approach for long- and short-run relationships. Results indicate that all variables significantly reduce CO₂ emissions over both periods. Unit root tests show that CO₂ emissions and per capita GDP are sometimes cointegrated, supporting the validity of the Environmental Kuznets Curve (EKC) hypothesis. The study also finds that the effect of explanatory variables on emissions depends on the type of pollutant. Overall, higher per capita income and FDI contribute to reducing emissions, confirming the EKC for South Asian economies. The findings suggest that these countries need coordinated environmental and economic policies to simultaneously promote growth and protect environmental quality.

Keywords: Environmental Kuznets Curve Hypothesis, South Asian Countries, Panel Evidence