Investigating the existence of asymmetric environmental Kuznets curve and pollution haven hypothesis in China: Fresh evidence from QARDL and quantile Granger causality

Abstract

This study aims to analyze the asymmetric long-run relationship between economic growth (EG), foreign direct investment (FDI), and carbon emissions (CO₂) within the context of the environmental Kuznets curve (EKC) and the pollution haven hypothesis (PHH) in China. Employing the quarterly data from 1982Q1 to 2018Q4, we have used novel techniques to meet the stated objectives of our study, named quantile ARDL and quantile Granger causality. The study provides novel outcomes using the advanced quantile ARDL and quantile Granger causality tests. The significant implication of this method is that it provides locational asymmetry. We find strong evidence of the EKC and PHH for China based on the empirical results of linear and nonlinear ARDL models. Similarly, findings of quantile Granger causality validate the bidirectional relationship among all variables in upper and lower quantiles. Moreover, the results of the Wald test confirm the asymmetric long-run relationship between FDI and carbon emissions (CO₂). Thus, legal measures must be enhanced, accepted, rigorously imposed, and monitored in all provinces to assure a further reduction in carbon emissions. This study will be conducive for the policymakers to combat environmental contamination concerning economic growth and FDI inflow in China.

Keywords: Environment Kuznets curve; Pollution haven hypothesis; Quantile ARDL.