Evaluating N-shaped Environmental Kuznets Curve for Economic growth, Globalization, and Investment flows in India: An ARDL bound test approach

Document Type : Research Paper

Author

Department of Commerce, Hindu College, University of Delhi, Delhi, India

10.22059/ier.2024.370515.1007908

Abstract

India came up with globalization and liberalization measures in 1991 that supported FDI inflows and encouraged massive industrialization. Simultaneously, in the last few decades India experienced an upsurge in carbon emission. Weaker environmental norms might be staging India as a sought-after destination for production units that are environmental hazardous. Hence, the present study is an attempt to empirically evaluate whether an upsurge in industrialization, investment inflows, and globalization have been detrimental for India’s environment or not. The study employs N-shaped EKC curve (for India) to capture the association between Carbon emission and GDP per capita; Carbon emissions and FDI inflows; and Carbon emissions and globalization as three different model specifications by employing time series data for the period 1991-2021. Unit root testing was done via ADF and PP to test the stationarity and ARDL bound test was conducted to validate long run results. The results for CO2 - GDP per capita weakly supported presence of N-shaped EKC whereas outcomes for CO2-FDI inflows strongly endorsed N-shaped curve for India. Results for CO2-globalisation supported N-shaped EKC but only for the long run coefficients. The results indicate that strong measures on the policy front are required specially to address India’s FDI inflows as India is likely to face environmental deterioration after reaching the trough point.

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Iranian Economic Review

Articles in Press, Accepted Manuscript
Available Online from 19 February 2024

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