The dynamic impacts of financial development and human capital on CO2 emission intensity in China: an ARDL approach
Abstract
This paper studies the dynamic impacts of financial development, human capital, and economic growth on CO2 emission intensity in China for the period 1978–2015, with a structural breakpoint in 1992, by employing an autoregressive distributed lag (ARDL) approach. The estimations show that there exists a long-run cointegration linkage among the variables, with three main findings. First, financial openness measured by net FDI inflows can significantly reduce CO2 emission intensity in both the short-term and the long-term, whereas the effects of both financial scale and financial efficiency are limited and insignificant. Second, there exists an inverted N-shaped relationship between human capital and CO2 emission intensity: improving human capital first decreases CO2 emission intensity (before 1992), then increases it in the short-run (after 1992), and, finally, lessens it in the long-run. Last, raising per capita income can also significantly lower CO2 emission intensity in the long-run. Accordingly, some policy implications are also discussed.
Keyword : CO2 emission intensity, financial development, human capital, economic growth, ARDL, China
How to Cite
Li, P., & Ouyang, Y. (2019). The dynamic impacts of financial development and human capital on CO2 emission intensity in China: an ARDL approach. Journal of Business Economics and Management, 20(5), 939-957. https://doi.org/10.3846/jbem.2019.10509
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
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Chen, S. (2011). The abatement of carbon dioxide intensity in China: factors decomposition and policy implications. The World Economy, 34(7), 1148-1167. https://doi.org/10.1111/j.1467-9701.2011.01370.x
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Goetz, S. J., Debertin, D. L., & Pagoulatos, A. (1998). Human capital, income, and environmental quality: a state-level analysis. Agricultural and Resource Economics Review, 27(2), 200-208. https://doi.org/10.1017/S1068280500006511
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Guariglia, A., & Poncet, S. (2008). Could financial distortions be no impediment to economic growth after all? Evidence from China. Journal of Comparative Economics, 36(4), 633-657. https://doi.org/10.1016/j.jce.2007.12.003
Halicioglu, F. (2009). An econometric study of CO2 emissions, energy consumption, income and foreign trade in Turkey. Energy Policy, 37(3), 1156-1164. https://doi.org/10.1016/j.enpol.2008.11.012
Hasan, I., Wachtel, P., & Zhou, M. (2009). Institutional development, financial deepening and economic growth: Evidence from China. Journal of Banking & Finance, 33(1), 157-170. https://doi.org/10.1016/j.jbankfin.2007.11.016
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Husain, H. (2016). Determinants of environmental degradation and empirical investigation of Kuznets curve: A comparative study of India and Bangladesh. Asian Journal of Empirical Research, 6(5), 131-141.
IEA (2016). CO2 Emissions from Fuel Combustion, OECD Publishing, Paris. https://doi.org/10.1787/co2_fuel-2016-en
Islam, F., Shahbaz, M., Ahmed, A. U., & Alam, M. M. (2013). Financial development and energy consumption nexus in Malaysia: A multivariate time series analysis. Economic Modelling, 30, 435-441. https://doi.org/10.1016/j.econmod.2012.09.033
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Kim, N. T., & Le, M. B. (2018). CO2 emissions and economic growth in Vietnam: An ARDL bound testing approach. Asian Journal of Economic Modelling, 6(1), 47-55. https://doi.org/10.18488/journal.8.2018.61.47.55
Lan, J., Kakinaka, M., & Huang, X. (2012). Foreign direct investment, human capital and environmental pollution in China. Environmental and Resource Economics, 51(2), 255-275. https://doi.org/10.1007/s10640-011-9498-2
Lapinskiene, G., Peleckis, K., & Nedelko, Z. (2017). Testing environmental Kuznets curve hypothesis: the role of enterprise’s sustainability and other factors on GHG in European countries. Journal of Business Economics and Management, 18(1), 54-67. https://doi.org/10.3846/16111699.2016.1249401
Lapinskiene, G., Peleckis, K., & Slavinskaite, N. (2017). Energy consumption, economic growth and greenhouse gas emissions in the European Union countries. Journal of Business Economics and Management, 18(6), 1082-1097. https://doi.org/10.3846/16111699.2017.1393457
Leitão, N. C. (2013). The environmental Kuznets curve and globalization: the empirical evidence for Portugal, Spain, Greece and Ireland. Energy Economics Letters, 1(1), 15-23. Retrieved from http://www.aessweb.com/journals/September2013/5049/1930
Liu, N., Ma, Z., & Kang, J. (2015). Changes in carbon intensity in China’s industrial sector: Decomposition and attribution analysis. Energy Policy, 87, 28-38. https://doi.org/10.1016/j.enpol.2015.08.035
Mose, N. G. (2017). Renewable energy and nonrenewable energy consumption, Co2 emissions and economic expansion nexus: further evidence from Kenya. Energy Economics Letters, 4(4), 36-48. https://doi.org/10.18488/journal.82.2017.44.36.48
Nag, B., & Parikh, J. (2000). Indicators of carbon emission intensity from commercial energy use in India. Energy Economics, 22(4), 441-461. https://doi.org/10.1016/S0140-9883(99)00032-8
Omri, A. (2013). CO2 emissions, energy consumption and economic growth nexus in MENA countries: Evidence from simultaneous equations models. Energy Economics, 40, 657-664. https://doi.org/10.1016/j.eneco.2013.09.003
Ouyang, Y., & Li, P. (2018). On the nexus of financial development, economic growth, and energy consumption in China: New perspective from a GMM panel VAR approach. Energy Economics, 71, 238-252. https://doi.org/10.1016/j.eneco.2018.02.015
Pablo-Romero, M. D. P., & Sánchez-Braza, A. (2015). Productive energy use and economic growth: Energy, physical and human capital relationships. Energy Economics, 49, 420-429. https://doi.org/10.1016/j.eneco.2015.03.010
Pesaran, M. H., & Shin, Y. (1998). An autoregressive distributed-lag modelling approach to cointegration analysis. Econometric Society Monographs, 31, 371-413. https://doi.org/10.1017/CCOL521633230.011
Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289-326. https://doi.org/10.1002/jae.616
Pfeiffer, B., & Mulder, P. (2013). Explaining the diffusion of renewable energy technology in developing countries. Energy Economics, 40, 285-296. https://doi.org/10.1016/j.eneco.2013.07.005
Richter, P. M., & Schiersch, A. (2017). CO2 emission intensity and exporting: Evidence from firm-level data. European Economic Review, 98, 373-391. https://doi.org/10.1016/j.euroecorev.2017.07.01
Sadorsky, P. (2010). The impact of financial development on energy consumption in emerging economies. Energy Policy, 38(5), 2528-2535. https://doi.org/10.1016/j.enpol.2009.12.048
Salim, R., Yao, Y., & Chen, G. S. (2017). Does human capital matter for energy consumption in China? Energy Economics, 67, 49-59. https://doi.org/10.1016/j.eneco.2017.05.016
Shahbaz, M., Hye, Q. M. A., Tiwari, A. K., & Leitão, N. C. (2013). Economic growth, energy consumption, financial development, international trade and CO2 emissions in Indonesia. Renewable and Sustainable Energy Reviews, 25, 109-121. https://doi.org/10.1016/j.rser.2013.04.009
Shahbaz, M., Solarin, S. A., Mahmood, H., & Arouri, M. (2013). Does financial development reduce CO2 emissions in Malaysian economy? A time series analysis. Economic Modelling, 35, 145-152. https://doi.org/10.1016/j.econmod.2013.06.037
Stern, N. (2015). Economic development, climate and values: making policy. Proceedings Biological Sciences, 282(1812), 20150820. https://doi.org/10.1098/rspb.2015.0820
Tamazian, A., Chousa, J. P., & Vadlamannati, K. C. (2009). Does higher economic and financial development lead to environmental degradation: Evidence from BRIC countries. Energy Policy, 37(1), 246-253. https://doi.org/10.1016/j.enpol.2008.08.025
Tamazian, A., & Rao, B. B. (2010). Do economic, financial and institutional developments matter for environmental degradation? Evidence from transitional economies. Energy Economics, 32(1), 137-145. https://doi.org/10.1016/j.eneco.2009.04.004
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