Pollution as one of the determinants of income in Malaysia: Comparison between single and simultaneous equation estimators of an EKC
| DOI | https://doi.org/10.1108/20425945201000019 |
| Date | 01 August 2010 |
| Published date | 01 August 2010 |
| Pages | 291-308 |
| Author | Halimahton Binti Borhan,Elsadig Musa Ahmed |
| Subject Matter | Public policy & environmental management |
World Journal of Science, Technology & Sustainable Development, Vol. 7, No. 3, 2010
291
Copyright © 2010 WASD
Abstract: This study aims to examine the relationship between economic growth
and different indicators of air and water pollution in Malaysia. Air pollution
indicators were assessed on a number of measures: carbon monoxide, sulphur
dioxide (SO2), nitrogen dioxide, ozone and particulate matter (PM10); while water
pollution indicators were evaluating on a number of measures: biochemical
oxygen demand, cadmium and arsenic. The income level per capita gross domestic
product per capita were measured from the year 1996 to 2006 quarterly. Being
different from the study by Hung and Shaw (2004) and Shen (2006), this study
estimates population density as an endogenous variable. It formulates a four-
equation simultaneous model for empirical research. Testes for exogeneity with
the Hausman test and estimates the simultaneity model using the two-stages
least squares method. The Environmental Kuznets Curve (EKC) hypothesis is
supported in the cases of SO2 and PM10, and there are several differences found
between single polynomial equation estimators commonly used in EKC literatures
and simultaneous equation estimators.
Keywords: Pollutants, Economic Growth, Malaysia, Environmental Kuznets Curve,
Simultaneity
Halimahton Binti Borhan1, University Technology Mara, Malaysia
Elsadig Musa Ahmed2, Multimedia University, Malaysia
polluTion aS one of The
deTerminanTS of income in malaySia:
compariSon beTWeen Single and
SimulTaneouS equaTion eSTimaTorS
of an ekc
inTroducTion
The seriousness and the long-term negative
impact of pollution cannot be overempha-
sised. If left to persist, it can bring harmful
effects to our health and economy that will
result in increasing health and social costs
being incurred. On the basis of the study
by Zhang and Yang (2007), extraordinary
levels of economic performance have been
clearly demonstrated over the last century
by many countries. Whether there is actu-
ally any contribution by environmental
degradation negatively to economic growth
and growth ceases eventually or whether it
is achieved through the sacrifice of environ-
mental quality. There are many recent stud-
ies of the Environmental Kuznets Curve
(EKC) that have tried to answer this ques-
tion. On the basis of the earlier papers such
1 Faculty of Business & Management, University Technology Mara, Malaysia, Email: Hali@bdrmelaka.uitm.edu.my
2 Economics Unit, Faculty of Business and Law, Multimedia University, 75450 Melaka, Malaysia,
Email: elsadigmusa@yahoo.com
292 Halimahton Binti Borhan and Elsadig Musa Ahmed
as Shafik and Sushenjit (1992), Panayoutou
(1993) and Grossman and Krueger (1995)
presented initial evidence that some pollut-
ants followed an EKC pattern.
According to Department of Environment
Quality Report (2004), air pollution oc-
curs when air impurities in the form of
gaseous or particles are emitted into the
atmosphere. Air pollutant comes from a
variety of natural and man-made sources.
Man-made sources include emission from
industrial activities, emissions from mo-
tor vehicles and burning of fossil fuels and
biomass. The water pollution in Malaysia
is originated from point sources and non-
point sources. Point sources that have been
identified include sewage treatment plants,
manufacturing and agro-based industries
and animal farms. Non-point sources are
mainly diffused ones such as agricultural
activities and surface runoffs. According
to Malaysia Environment Quality Report
2004, the Department of Environment
has recorded 17,991 water pollution point
sources in 2004 comprising mainly sewage
treatment plants (54%), manufacturing in-
dustries (38%), animal farms (5%) and agro-
based industries (3%).
Tun Dr. Mahathir, former prime min-
ister of Malaysia (1996), stated that one
of the key issues that need to be seriously
considered in the efforts to establish and
preserve a clean global environment is air
pollution. Air pollution is fast and it is be-
coming a major environmental concern of
most governments, with the rapid deteriora-
tion of air quality especially in urban areas.
Increasing transportation activities arising
from rapid industrial growth and urbanisa-
tion are the main contributing factors to
the persistently prevailing problem of air
pollution in the world today. According to
him, in Malaysia, for instance, the transpor-
tation sector consumed some 40% of the
country’s total commercial energy demand
in 1995 and is anticipated to continue to
grow at about 8.1% per annum. Keynote
address presented by Raja Dato’ Zaharaton
Director General, Economic Planning Unit,
Prime Minister’s Department, Malaysia
(2004) stated that rapid development has
created gaps in the prevention of pollution
and the highly dense population in urban
centers has converted rivers into open sew-
ers. Cities are well known for being pollut-
ers of aquatic environment with sewage and
municipal wastewater, industrial effluent
and polluted urban runoff. Similarly, the
farming communities pollute the aquatic
environment with irrigation returns that
contain fertilisers and pesticides and animal
wastes. River water quality is also degraded
by sediments from land clearance and solid
wastes. Water pollution disrupts water sup-
ply services, affects human health and de-
stroys aquatic lives and habitat. They came
out with an idea that economic growth is by
nature the remedy to environmental prob-
lems. Opposite opinion found in the recent
works by de Bruyn (2000) focussed on the
effect of using different indicators, the use
of a wider range of explanatory variables
than income alone.
This study contributes to the available
literature by modifying Hung and Shaw
(2004) model in using EKC and extends it
to include variables such as number of uni-
versity graduates, foreign direct investment,
fixed capital investment, the secondary in-
dustry share, number of motor vehicles and
government pollution abatement expense.
This study also adopts Shen (2006) model
and analyses and interprets the indepen-
dent variables for secondary industry share
and government pollution abatement ex-
pense (direct and indirect impact) by modi-
fying this model and extends it to include
variables such as number of motor vehicles,
number of university graduates, foreign
To continue reading
Request your trial