Empirical Evidence in Ecuador Between Economic Growth and Environmental Deterioration

Currently, obtaining evidence of the correlation between economic growth and environmental deterioration is of great relevance. Due to an increase in economic activity, an increase in CO2 emissions and its possible effects on the current climate change is very worrying. The studies that analyze this correlation serve as a basis for the awareness of countries and the establishment of policies worldwide to curb such deterioration. The objective of this research is achieved through a panel data model and spatial econometric techniques to address the relationship between economic growth and environmental degradation in Ecuador. A regression model is proposed where the deterioration dependent variable is CO2 emissions, which is also an independent variable for the provincial gross value added. Poverty and inequality are considered as control variables in order to observe their effects on CO2 emission. The results are coherent with what is stated by the theory and describe an inverted U-shaped curve. They also show that the generation of pollutant emissions is directly related to the growth of the vehicle fleet and inversely related with the population’s schooling levels. The spatial effects are significant and the spatial impact multipliers indicate that the strongest direct and indirect effect is the one caused by the generation of car emissions per capita. This variable is relevant for the design of public policy aimed at improving environmental quality.