Pollution haven hypothesis and the environmental Kuznets curve of Bangladesh: an empirical investigation

Abstract

This study investigated pollution haven hypothesis (PHH) validation and existence of the environmental Kuznets curve (EKC) hypothesis in Bangladesh. The study used CO₂ emissions as the key indicator of environmental pollution. Moreover, we considered relevant explanatory variables such as foreign direct investments, trade openness, financial development, gross fixed capital formation, energy consumption and urbanization to achieve our goals. Covering the time series data from 1986 to 2018, the autoregressive distributed lag (ARDL) approach was applied. The findings revealed a long-run cointegration between the considered variables, and the ARDL results cannot validate the PHH in Bangladesh. These results contribute to the existing literature by concentrating on the EKC hypothesis for financial development purposes. Furthermore, we found that urbanization, gross fixed capital formation and trade openness positively influence CO₂ emissions, while energy use reduces CO₂ emissions. These findings suggest that Bangladesh should take advantage of the invalidity of the PHH and introduce eco-friendly urbanization planning to mitigate detrimental effects of environmental pollution.