EXAMINING THE EXISTENCE OF CO 2 EMISSION PER CAPITA CONVERGENCE IN EAST ASIA

Transcription

1 SHIMAMOTO K., Regonal Scence Inqury, Vol. IX, (), 07, pp. -8 EXAMIIG THE EXISTECE OF CO EMISSIO PER CAPITA COVERGECE I EAST ASIA Kench SHIMAMOTO Hrao School of Management, Konan Unversy, shnomya, Japan Correspondence detals: Dr. Kench Shmamoto Hrao School of Management, Konan Unversy, 8-33 Takamatsu-cho, shnomya, Hyogo, Japan kench@center.konan-u.ac.jp Abstract The flyng geese model of ndustral upgradng depcts the ncome convergence or economc development convergence n East Asa. However, how does ths convergence of economc development effect the envronment? The surge n the consumpton of fossl fuel s causng a large ncrease n emsson of CO. Global warmng affected by CO emsson poses as a serous threat to East Asan countres wh large coastal areas exposed to the rse n sea level. Ths paper examnes CO emsson per capa to nvestgate the exstence of envronmental convergence n East Asan countres and predcts future dstrbuton usng devatons, nterquartle range, kernel denses dstrbuton, tme seres approach, β convergence analyss and the Markov chan approach. As a result, no meanngful evdence of convergence was found n the hstorcal evaluaton and a non-compressed ergodc dstrbuton was found n the future predcton for CO emsson. Keywords: envronmental convergence, East Asa, CO JEL classfcaton: Q53, Q56, R0. Introducton Queston of convergence n pollutant emssons between countres have recently been nvestgated followng the studes performed on economc convergence whch suggests that poorer regons should catch up to relatvely rcher regons over tme. As there have been numerous emprcal analyses comparng dfferent regons whch support the economc convergence hypothess (e.g. Barro, 99; Carlno and Mlls, 993; Cole and eumayer, 003; Evans and Karras, 996), studes have been performed to see whether there would be a convergence durng a perod of tme f countres wh low emsson per capa ncreased ther emsson per capa and n the oppose, hgh emsson countres decreased ther emssons per capa (Lst, 999; Strazcch and Lst, 003; guyen Van, 005). Ths envronmental convergence hypothess s closely related to the economc convergence hypothess and the exstence of an Envronmental Kuznets Curves (EKC) or an nverted U-shape curve for the relatonshp between pollutant emsson and ncome (Strazcch and Lst, 003; guyen Van, 005). As we follow the theoretcal and emprcal arguments on the EKC where envronmental qualy frst declnes and then ncreases as per capa ncome rses (e.g. Lopez, 994; Andreon and Levnson, 00; Stokey, 998; Grossman and Kruger, 995; Cole et al., 997; Holtz-Eakn and Selden, 995), has been argued that envronmental qualy wll converge across regons f per capa ncome converges. In other words, pollutant emssons ncrease wh ncome n lower ncome countres but decrease wh ncome n hgher ncome countres and all countres wll have the same ncome level followng the economc convergence hypothess. Therefore, f the EKC and economc convergence hypotheses are vald, we wll expect an envronmental convergence (guyen Van, 005). If we focus on the East Asan economy, there are numerous studes on s rapd economc growth and emprcal studes on the ncome convergence or economc development There are also studes whch do not fnd ncome convergence. Some examples are the study by Dobson and Ranlogans (00) on Latn Amercan countres over the perod of 970 to 998 and the study by Su (003) on 5 OECD countres.

2 SHIMAMOTO K., Regonal Scence Inqury, Vol. IX, (), 07, pp. -8 convergence n East Asa (e.g. Zhang, 00; Zhang, 003; Yap, 005; Hsao and Hsao, 004; Jayanthakumaran and Lee, 03). The flyng geese model of ndustral upgradng depcts ths catchng up found amongst the East Asan economes (Akamatsu 935, 96; Kojma, 000; Kojma and Ozawa, 984, 985). The logc of the flyng geese model of relocatng producton process to cheaper areas abroad as domestc costs rse (Pangestu and Gooptu, 003) also supports the noton of countres wh low emsson per capa ncreasng ther emsson per capa wh the ncrease n producton and n the oppose, hgh emsson countres decreasng ther emssons per capa. However, what does mean when poorer regons specalze n the producton of polluton-ntensve goods to experence large ncreases n per capa ncome n order to catch up to rcher regons specalzng n the producton of clean goods and subsequently have a lower growth rate n per capa ncome? Does ths mean that the regons are convergng n monetary wealth but dvergng n envronmental qualy (Lst, 999)? Ths s a serous queston to East Asan economes whch face envronmental problems caused by ncreasng ndustralzaton (Asan Development Bank, 00, 005). The surge n the consumpton of fossl fuel s causng a large ncrease n emsson of CO. Global warmng effected by CO emsson mpacts the coastal regons wh the rse n sea level. Wh many of the East Asan countres exposed to large coastal areas, ths poses as a serous threat. For example, the potental land loss resultng from sea-level rse and the number of people exposed for Indonesa s 60 cm and. mllon people. For Vetnam, there s the potental of 50 cm rse n sea-level, effectng 3 percent of the populaton (IPCC, 00). In ths paper, we examne CO emsson per capa between 960 and 000 to examne the exstence of envronmental convergence n East Asan countres. There are not many emprcal studes on envronmental convergence and to the best of my knowledge, there s no envronmental convergence study on East Asan countres. So ths paper wll be the frst to attempt to examne whether the prevous studes on ncome convergence among East Asan countres can be supported by a convergence of envronmental qualy. The other characterstc of ths paper s that apples an extensve range of methods to examne the convergence of envronmental qualy amongst East Asan countres. These methods are devatons, nterquartle range, kernel denses dstrbuton, tme seres approach and β convergence analyss. It also predcts future dstrbuton usng the Markov chan approach. The remander of ths paper proceeds as follows: Secton provdes a bref revew of the envronmental convergence lerature, data descrpton, and explans the emprcal methods that were used. Secton 3 presents the results from the emprcal studes and Secton 4 provdes concludng comments and dscusses polcy mplcatons.. Prevous research, data and emprcal methods.. Prevous research There are several studes that have undertaken ths queston on convergence/dvergence of envronmental qualy. Developng the Solow growth model (Solow, 956) whch apples technologcal progress n abatement and polluton, Brock and Taylor (004, 00) examne CO convergence among OECD countres. They fnd convergence concernng CO, usng a cross-sectonal analyss. Alvarez et al. (005) develop a neoclasscal growth model augmented to ncorporate the dynamcs of a stock of pollutant and examne convergence concernng some ar pollutants per capa (SO, O, CO, CO and MVOC) among European countres between 990 and 000. The results showed envronmental convergence for most of the ar pollutants. Strazcch and Lst (003) study the case of CO among ndustral countres, usng both the cross-sectonal and the tme seres approach and fnd that CO emssons have converged. These studes all focus on cross country envronmental convergence. However, there are also some studes whch focus on a specfc country-.e. US. Usng both crosssectonal convergence analyss and stochastc convergence analyss, Lst (999) examnes SO and Ox data for regons n the US between 99 and 994. He fnds convergence of these emssons. Bulte et al. (007) examne the role nstutonal context has on envronmental convergence, focusng on SO and Ox cases among US regons. Usng the stochastc convergence analyss and the tme-seres tests for β convergence, they fnd that

3 SHIMAMOTO K., Regonal Scence Inqury, Vol. IX, (), 07, pp regulatons, especally federal ones, have mpact on envronmental convergence. Producton CO emsson per capa and consumpton CO emsson per capa for the US states are studed by Aldy (007) who fnds producton CO emsson per capa to dverge, but consumpton CO emsson per capa to converge. Ths was due to the effect of ncreasng nterstates electrcy trade over tme. There are also some prevous studes whch observe the world as well as developed countres. Stegman (005) analyses CO emsson per capa convergence for the world and OECD countres. The results of consderng ntra-dstrbuton dynamcs show that CO emsson per capa does not converge over the perod between 950 and 999. guyen Van (005) also takes ntra-dstrbuton dynamcs nto account as well as the tradonal average behavour approach, and examnes CO emsson per capa for both the world and ndustral countres. The results showed dvergence for the world and convergence for ndustral countres. Emprcal research by Aldy (006) uses varous methods ncludng ntra-dstrbuton dynamcs and the tme seres approach to examne f CO emsson per capa converges over tme for both the world and OECD countres. Further examnaton s conducted usng the Markov transon approach to predct future dstrbuton. Ths study predcts envronmental convergence among OECD countres whle envronmental dvergence among the world... Data descrpton To examne whether envronmental qualy have converged across the East Asan countres, ths paper uses CO as an ndcator of envronmental qualy. The data for CO s from the World Development Indcators (World Bank, 005). The perod from 960 to 000 s used. These emssons are dvded by populaton whch s sourced from the World Development Indcators (World Bank, 005). East Asan countres sampled here for CO emsson per capa are: Japan, Korea, Chna, Sngapore, Thaland, Phlppnes, Camboda, Hong Kong, Indonesa, Lao PDR, and Myanmar ( countres)..3. Emprcal methods In order to assess the cross-sectonal convergence of CO emsson per capa over tme for East Asa, ths paper conducts fve types of analyss. Frst of all, estmates a varety of devatons to measure the spread of CO emsson per capa. The standard devaton (SD) of the data s represented as:, () where denotes country, and s the number of countres. X s the natural logarhm of CO emsson per capa of country. X represents the average natural logarhm of CO emsson per capa of East Asa observed. Standard devaton s an approprate method wh data that exhbs normal dstrbuton, snce represents the spread of the data around the centre and n the tals of the dstrbuton. However, f the data does not exhb normal dstrbuton, the average absolute devaton or the medan absolute devaton may be more used (Stegman, 005). We defne the average absolute devaton (AD) as ( X X ) = AD=, () where X s the absolute value of X. The medan absolute devaton s less affected by outlers (.e. extreme observatons) n tals of the dstrbuton of the data, compared to the AD. The medan absolute devaton (MD) s defned as

4 4 SHIMAMOTO K., Regonal Scence Inqury, Vol. IX, (), 07, pp. -8 MD = medan( X X ), (3) * where X represents the medan of the data. As the above measures consder the spread n the tals of dstrbuton of the data set, we wll next calculate the nter-quartle range (IQR) n order to measure the spread n the centre of the dstrbuton of the data set. IQR 75-5 s the value of the 75 th percentle mnus the value of 5 th percentle. Snce the IQR s sensve to the percentle ponts, we also estmate IQR80-0 whch the value of the 80 th percentle mnus the value of 0 th percentle. To llustrate the CO emsson trend, we next present the estmated kernel denses of CO emsson per capa. Intra-dstrbuton dynamcs whch may not be captured by the devatons and IQRs descrbed above can be observed wh ths method. A country s per capa emssons are expressed as natural logarhm of s emssons per capa relatve to the observed East Asan average (z). We have used the Espanechkov kernel and Slverman s (986) bandwdth choce rule to estmate the denses. Ths produces a kernel densy estmator functon of z z d( z) = K, (4) h = h * where K 3( 0.z ) = f z < 5, and 0 otherwse, 4 5 I 0.9 mn s,.349 h =, and 5 reflects the number of countres, I s the IQR 75-5 for the sample used, and s s standard devaton of the observed sample. The Espanechkov kernel s appled as s the most effcent kernel functon to mnmze the mean ntegrated square error (Aldy, 007) and the Slverman bandwdth choce rule s often employed n densy estmaton. ext we wll examne the convergence of CO emsson per capa usng the parametrc approach. We test for whether a un root characterzes the tme seres of CO emsson per capa to assess stochastc convergence. If stochastc convergence s found for CO emsson per capa, then the shocks to CO emsson per capa are temporary and the data are statonary over tme, suggestng that CO emsson per capa are convergng. However, f a un root can be confrmed n the tme seres of CO emsson per capa, then the shocks are permanent and CO emsson per capa are not statonary over tme and not convergng. As many studes have used un root tests to evaluate ncome convergence (e.g. Carlno and Mlls, 993; L and Papell, 999; Loewy and Papell, 996; Oxley and Greasley, 995; Tsonas, 000), un root tests have been conducted for emssons convergence. Lst (999) performed un root tests and examned the US regons convergence of Ox per capa and SO per capa. Aldy (006, 007) examne CO emsson per capa for both the US regons and the world/oecd and Strazcch and Lst (003) examne the ndustral countres for CO emsson per capa wh ths test. We have used the same panel-based un root test as the one developed by Im et al. (003) to examne the exstence of stochastc convergence amongst countres CO emsson per capa. Ths requres country-specfc augmented Dckey-Fuller tests whch s constructed by estmatng the followng specfcaton on a county-by-country bass: x = ϖ + θ t+ π x + η x + ν l k k, (5) k=

5 SHIMAMOTO K., Regonal Scence Inqury, Vol. IX, (), 07, pp where x represents the natural logarhm of CO emsson per capa relatve to the East Asan average observed for each country for each year. ϖ represents the constant term specfc to each country, and θ t ndcates a lnear tme trend. π depcts the parameter to test the null of a un root. l defnes the maxmum number of lagged terms, and x k represents a parameter estmated for each frst-dfferenced lagged term. ν represents the contemporaneous error term and s assumed to be ndependent and dentcally dstrbuted (..d.) wh zero mean and fne varance. Perron s method (989) was used for the lag selecton. After estmatng equaton (5) for each country, by averagng the country-specfc augmented Dckey-Fuller statstc, the Im et al. (003) test statstc s created: η k t T = = t. (6) π Im et al. (003) shows that ths test s more powerful n rejectng the null hypothess that un roots are confrmed for all the tme seres observed, compared to the ndvdual augmented Dckey-Fuller tests. In ther study, they also compute sample crcal values va stochastc smulaton whch we use to evaluate the panel-based test statstc for relatve CO emssons per capa. Ths method by Im et. al (003) s a useful method to confrm whether the panel data s statonary by performng the test of null hypothess of un root. However, unless there s strong evdence to the contrary, s well known that the null hypothess s accepted. In order to reconfrm whether the panel data on emssons per capa s statonary, we wll undertake the Hadr (000) test to complement the lmatons of Im et al. (003). In other words, we wll perform the test of null hypothess of statonary wh the error term beng..d.. We, furthermore, extend heterogeneous errors across country and apply serally correlated dsturbance terms accordng to the work by Hadr (000). Followng the work by Hadr (000), we consder the followng two models to examne whether CO emsson per capa s statonary around a level and whether has trend statonary. y = r + ε, (7) y = r +φ t+ ε. (8) r Here s a random walk: r + = r u. (9) s country and t denotes year. y s CO emsson per capa relatve to the East Asan ε average observed here. u and are mutually..d. across and over t wh Eε [ ] = 0 E[ ε ] =σ, ε E[ u ] = 0, E[ u ] and = σ u. Equaton (7) represents the model to perform the test of the null hypothess of statonary around a level. By usng back substuton, we obtan the followng equaton: y t = r 0 + t= u + ε. (0) See Lst and Strazch (003).

6 6 SHIMAMOTO K., Regonal Scence Inqury, Vol. IX, (), 07, pp. -8 r The nal values 0 are treated as fxed unknowns and play the role of heterogeneous ntercepts. On the other hand, Equaton (8) represents the model to perform the test of the null hypothess of trend statonary. By also usng back substuton, we derve the followng equaton: y = r + φ t+ u + ε t 0. () t= In order to perform the test of statonary around a level, Hadr (000) frst regresses dependent varable y on an ntercept for equaton (7) and on an ntercept plus a tme trend for equaton (8), and derves the resduals. By usng the resduals, Hadr (000) calculates the ε Lagrange multpler (LM) statstc under the assumpton that and u are mutually ndependent normals and..d across and over t. As used by Hadr (000), the resdualbased LM statstc s: LM µ = = T ( T S t= ˆ σ ε ), () Where S = t j= ^ ε j T ˆ σ ε = ˆ ε j T = t=. To confrm whether all tme seres are statonary, he uses the fact that the lmng dstrbuton of the test statstc, whch s derved by subtractng the means from the LM statstc and dvdng by the standard devaton, weakly converges to normal dstrbuton as follows: Z µ = ( LM u ξu ) (0,) ζ u. (3) ext n order to take nto account the heterogeneous errors across, Hadr (000) σ computes ε for each, and substutes for the above LM statstc and then derves the LM statstc under heterogeneous errors across as follows: LM h µ = = T ( T t= ˆ σ ε, S ). (4) Furthermore, when takng nto consderaton serally correlated dsturbance terms 3, he 3 To consder quet general forms of temporal dependence over t, Hadr (000) assumes eher that ε satsfy the strong mxng regulary condons of Phllps and Perron (988) or the lnear process condons of Phllps and Solo (99).

7 SHIMAMOTO K., Regonal Scence Inqury, Vol. IX, (), 07, pp replaces σε by the long-run varance σ and computes the LM statstc: Where σ = lmt ( ST ). T LM s µ = = T ( T t= ˆ σ S ), (5) Concernng LM statstc and Z statstc to perform the test of the null hypothess of trend statonary, the procedure s smlar to the above procedure to derve LM statstc and Z statstc to perform the test of the null hypothess of beng statonary around a level except for the usage of resduals whch s computed by regressng dependent varable on an ntercept and a tme trend for equaton (8). 4 In ths paper, we employ the above resdual-based LM statstc to perform the test of the null hypothess of statonary for panel data to examne whether relatve CO emsson per capa converges n East Asan countres. ext we wll examne the convergence of CO per capa usng the parametrc approach whch s famlar n growth emprcal lerature. We use the technque called β-convergence that was developed by Baumol (986). Cg α β + e, (6) = + C0 where Cg denotes the average annual growth rate of the natural logarhm of CO emsson per capa for each country over the sample perod between α s a constant term, and β s the parameter to test the null hypothess of dvergence. C 0 denotes the natural logarhm of the nal value of CO emsson per capa n country. e s the contemporaneous error term whch s assumed..d. wh zero mean and fne varance. β < 0 λτ wll represent a convergence n CO emsson per capa. β = ( exp ) where τ denotes the length of the study perod and λ represents the convergence speed 5. The above methods were used to examne the hstorcal convergence of CO emsson per capa. ext, we examne future CO emsson dstrbuton. For the purpose of estmatng future dstrbuton, we perform a Markov chan transon matrx analyss, whch s based on a nonparametrc method employed n economc growth studes to evaluate ncome dstrbuton. The transon matrx framework has been used by Quah (993) to evaluate the dstrbuton of per capa ncome. Followng ths study by Quah (993), Aldy (006, 007) examnes the CO emsson per capa for the US regons and the world/oecd. Ths paper wll also use the transon framework to map ths year s dstrbuton ( W ) of per capa emssons relatve to the East Asan average sampled here nto next year s dstrbuton ( W t+ ): W = t+ M * W t. (7) t 4 More precsely speakng, the LM statstc and Z statstc to perform the test of the null hypothess of statonary around a level s dfferent from the test of the null hypothess of trend statonary n the functon of the Brownan moton and the characterstcs functon whch s used for computaton of mean and varance of the LM statstc. 5 λ can be estmated and s varance calculated by usng the delta method once the estmate of β s avalable.

8 8 SHIMAMOTO K., Regonal Scence Inqury, Vol. IX, (), 07, pp. -8 The mappng operator M can be used to work wh any process, but smlar to Aldy (006, 007), Quah (993) and Kremer et al. (00), ths paper assumes a frst-order Markov process wh tme nvarant transon probables. Repeatng ths expresson T tmes produces W = M * W T t+ T t. (8) The larger T becomes and f W t+ T = Wt+ T, ths can express the long-run steady state (ergodc) dstrbuton of relatve per capa emssons. We frst allocate the East Asan countres accordng to the fve categores of relatve per capa emssons relatve to the East Asan countres average as conducted by Aldy (007) n hs study on envronmental convergence and Quah (993) and Kremer et al. (00) n ther ncome convergence studes. The fve categores are: relatve per capa emsson less than 50 percent of the East Asan average, between 50 percent and 75 percent of the East Asan average, between 75 percent and 00 percent of the East Asan average, between 00 percent and 00 percent of the East Asan average, and greater than 00 percent of the East Asan average. In order to produce the transon matrx, we next compute the one year transons between categores. The mappng operator s then appled to the dstrbuton n the last year of the data set to forecast the future dstrbuton for the data set. The advantage of ths analyss s that the changes to the data over tme can be shown wh lmed constrant, snce the analyss does not requre much structure to the data. We only appled the fve categores and the frstorder Markov assumpton. However, ths analyss has several lmatons. Ths approach can llustrate future dstrbuton, but does not explan the reason why the emsson n the 960s may be dfferent from those n the 970s, 980s or 990s. Followng Aldy (006, 007), we address ths ssue by comparng the ergodc dstrbuton derved from transon probables based on varous perods. The other lmatons s that snce ths approach uses data from past dstrbutons to forecast future dstrbutons, changes that have occurred n the past such as n polces, nstutons or technologes are not well expressed n ths analyss. 3. Results 3.. Hstorcal results Frst of all, we analyse the results on hstorcal evaluaton of CO emsson per capa. Fgure llustrates estmates of each of the measures for devatons over the perod between 960 and 000 for CO emsson per capa. The results of the CO emsson per capa n Fgure shows an ncrease tll the early 970s followed by a decrease to the early 980s and then s stable. However, the end of the sample perod s also hgher than the start of the sample perod whch s evdence of dvergence for CO emsson per capa. Fgure. Devatons of CO per capa,5, 0,9 0,6 0, SD AD MD

9 SHIMAMOTO K., Regonal Scence Inqury, Vol. IX, (), 07, pp Accordng to the IQR whch focuses on the centre of dstrbuton of the data, Fgure dsplays an ncrease of CO emsson per capa and thus ndcates a consstent dvergence. The IQR80-0 whch dsplays a stronger ncrease trend ndcates that the further the observaton s from the centre, there s a stronger sgn of dvergence. In other words, the dfference n CO emsson per capa between countres further from the centre s ncreasng. Fgure. IQRs of CO per capa, 0,8 0,6 0,4 0, IQR IQR The above results on devatons and the IQR analyss show that CO emsson per capa has some perods of convergence but overall support evdence of dvergence. As descrbed n Secton, these measures do not characterze the cross-sectonal dstrbuton. They are shown n Fgure 3 whch llustrates the comparson between the kernel densy dstrbutons of relatve CO emsson per capa for the start of the sampled perod (960) wh the end of the sampled perod (000). The results fnd that the dstrbuton of relatve CO emsson per capa n 960 s slghtly more compressed than that n 000. Ths means that relatve CO emsson per capa does not converge. As llustrated n Fgure 4, for relatve CO emsson per capa, the kernel densy dstrbuton for 960 to 964 were thcker near the average and thnner n the tals when compared to the dstrbuton from 996 to 000. Ths suggests a dvergence of relatve CO emsson per capa and supports the results of the devatons and IQRs. Furthermore, n Fgure 5 when the kernel densy dstrbuton for the perod of 960 to 969 s compared wh the perod of 99 to 000, the same results are acheved as the earler perod showng a more compact dstrbuton ndcatng a dvergence n relatve CO emsson per capa. Fgure 3. Comparson of kernel densy dstrbuton of frst year wh last year Densy CO Kernel Relatve Densy CO Per Estmate Capa

10 0 SHIMAMOTO K., Regonal Scence Inqury, Vol. IX, (), 07, pp. -8 Fgure 4. Comparson of kernel densy dstrbuton of frst 5 years wh last 5 years Densy Relatve CO COpc5 Per Capa Kernel Densy Estmate Fgure 5. Comparson of kernel densy dstrbuton of frst 0 years wh last 0 years Densy Relatve CO COpc0 Per Capa Kernel Densy Estmate The methods used above are related to nonparametrc approaches. ext we wll examne the convergence of CO emsson per capa through parametrc approaches. Frst we wll nvestgate the convergence of relatve CO emsson per capa through tme seres analyss for the East Asan countres. Accordng to Table, the Im et al. (003) test statstc for relatve CO emsson per capa s -.4, whch cannot justfy rejectng the null hypothess that the tme seres of the East Asan countres are characterzed by a un root. Shocks to relatve CO emsson per capa s found to be persstent, and the East Asan countres are not convergng n a stochastc sense. Table shows Hadr (000) s test whch performs the null hypothess of statonary wh not only the error term beng..d. but also extendng heterogeneous errors across country and applyng serally correlated dsturbance terms. The results ndcate that under the error term beng..d. Zµ statstc for relatve CO emsson per capa s 7.083, whch can reject the null hypothess that all tme seres n the panel are statonary process around a level. The results also shows that under the error term beng..d. Zτ statstc for relatve CO emsson per capa s , whch can justfy rejectng the null hypothess that all tme seres n the panel are trend statonary processes. These results show that when consderng heteroskedastc dstrbuton across uns for relatve CO emsson per capa we can also reject the null hypothess whch consders that all tme seres n the panel

11 SHIMAMOTO K., Regonal Scence Inqury, Vol. IX, (), 07, pp. -8 are statonary processes around both a level and a trend. When consderng seral dependence n errors, Table shows that we can agan reject the null hypothess for relatve CO emsson per capa. These results support the results from the Im et al. (003) s test, the devatons, IQRs and the kernel dstrbuton. Table. Im et al. (003) Panel-based Un Root Tests IPS t-statstc 0% 5% % ⅰ) Test statstc constructed from CO of countres, 4-year tme seres augmented Dckey-Fuller tests (wh trend). ⅱ) The above crcal value use =5 and T=50 as n Im et al. (003). ⅲ) The lag selecton was chosen on a country by country bass usng the Perron method (989). Table. Hadr (000) Panel Un Root Test Zµ P-value Zτ P-value Homo Hetero SerDep ⅰ) H0: all tme seres n the panel are statonary processes ( tme seres for CO) ⅱ) Homo: homoskedastc dsturbances across uns ⅲ) Hetero: heteroskedastc dsturbances across uns ⅳ) SerDep: controllng for seral dependence n errors (lag truncaton = 7) The above results are also confrmed by the β convergence analyss. As llustrated n Fgure 6, the plots do not show any consstent relatonshp between the nal level of CO emsson per capa and the average growth rate of CO emsson per capa. If we examne ths further n Table 3, the results of the cross-sectonal econometrc analyss show sgnfcant heteroskedascy performng the Breusch-Pagan / Cook-Wesberg test. Hence, we use the OLS wh robust standard error whch s based on the Huber/Whe/sandwch estmator of varance. As a result, we fnd no sgnfcant evdence of convergence 6. Through these studes, we were able to examne the representatve behavour and ntra-dstrbuton dynamcs of CO emssons per capa whch resulted n fndng envronmental dvergence n the East Asan countres. 6 By usng the bootstrap and the jackknfe method, we conduct the estmatons of standard errors. The results regardng statstcal sgnfcance of nal value of CO per capa are the same as those from robust standard error whch s based on Huber/Whe/sandwch estmator of varance.

12 SHIMAMOTO K., Regonal Scence Inqury, Vol. IX, (), 07, pp. -8 Fgure 6. The relatonshp between nal level of CO per capa and the average growth rate of CO per capa Growth Level Table 3. β Convergence Analyss Coeffcent Robust Standard Error P>t β α λ Breusch-Pagan / Cook-Wesberg Test 0.06 R-squared 0.7 o. of Obs. Robust standard error s based on the Huber/Whe/sandwch estmator of varance. ext, we observe relatve CO emsson per capa for each country over tme as llustrated n Fgure 7. In the 960s, Japan s relatve CO emsson per capa was much hgher than the average of East Asa. The less developed countres such as Camboda and Lao PDR had a low relatve CO emsson per capa. In the latter 960s, Sngapore had a sudden ncrease n relatve CO emsson per capa and replaced Japan as the hghest relatve CO emsson per capa followed by Japan, Hong Kong and Korea. In the 970s, countres wh low relatve CO emsson per capa contnued to be the less developed countres. The results for the 980s and the 990s contnued on a smlar path wh Sngapore havng the hghest relatve CO emsson per capa followed by Japan, Korea and Hong Kong and the less developed countres showng low relatve CO emsson per capa. These observatons of frst Japan and then the newly ndustralsed countres havng a hgher than average relatve CO emsson per capa and the less developed countres havng low relatve CO emsson per capa can be consdered to have affected the relatve CO emsson per capa dvergence n East Asa. ext, we observe relatve CO emsson per capa for each country over tme as llustrated n Fgure 7. In the 960s, Japan s relatve CO emsson per capa was much hgher than the average of East Asa. The less developed countres such as Camboda and Lao PDR had a low

13 SHIMAMOTO K., Regonal Scence Inqury, Vol. IX, (), 07, pp relatve CO emsson per capa. In the latter 960s, Sngapore had a sudden ncrease n relatve CO emsson per capa and replaced Japan as the hghest relatve CO emsson per capa followed by Japan, Hong Kong and Korea. In the 970s, countres wh low relatve CO emsson per capa contnued to be the less developed countres. The results for the 980s and the 990s contnued on a smlar path wh Sngapore havng the hghest relatve CO emsson per capa followed by Japan, Korea and Hong Kong and the less developed countres showng low relatve CO emsson per capa. These observatons of frst Japan and then the newly ndustralsed countres havng a hgher than average relatve CO emsson per capa and the less developed countres havng low relatve CO emsson per capa can be consdered to have affected the relatve CO emsson per capa dvergence n East Asa. 6 Fgure 7. Relatve CO per capa trend n East Asa Camboda Chna Hong Kong, Chna Indonesa Japan Korea, Rep. Lao PDR Myanmar Phlppnes Sngapore Thaland 3.. Forecastng future emsson dstrbuton Ths paper wll next revew the results of future dstrbuton for CO emsson per capa. Table 4 presents the transon matrx over and the estmated ergodc dstrbuton for relatve CO emsson per capa. Lke Aldy (006, 007) s fndngs for the case of relatve CO emsson per capa, the hgh probables along the dagonal suggests a hgh degree of persstence n countres relatve CO emsson per capa. The long-run steady state (ergodc) dstrbuton of relatve CO emsson per capa shows that around 70 percent of East Asan countres would be expected to be n the lowest or hghest category of relatve CO emsson per capa and only percent of East Asan countres would have CO emsson per capa n two categores around the East Asa countres average (.e. between 0.75 and of East Asan countres average). Ths suggests that the dstrbuton s not compressed around the East Asan countres average.

14 4 SHIMAMOTO K., Regonal Scence Inqury, Vol. IX, (), 07, pp. -8 Table 4. Estmates of Transon Matrx and Ergodc Dstrbuton: Relatve CO Per Capa Year Transons - Upper Endpont Upper Endpont Ergodc The estmated ergodc dstrbuton s lkely to be effected by the sample perods to construct the transon matrx. The ergodc dstrbuton for transon matrces for the perods between 960 to 000, 970 to 000, 980 to 000 and 990 to 000 for the East Asan sample s provded n Table 5. It also shows that the estmated ergodc dstrbuton for transon matrces for these sample perods have a smlar trend and suggests that the ergodc dstrbutons of relatve CO emsson per capa are not compressed around the sampled East Asan average. Furthermore, relatve CO emsson per capa exhbs thnner bottom of the estmated ergodc dstrbuton over shorter perods and thcker top of the estmated ergodc dstrbuton over shorter perods. Table 5. Estmates of Ergodc Dstrbutons Based on Varous Tme Perods: Relatve CO Per Capa Year Transons Upper Endpont Tme Perod Further to the prevous one year Markov transon matrx we also performed a fve year Markov transon matrx based on the perod from 960 to 000. As explaned by Kremer et al. (00), transons perods longer than one year reduces the mpact on the estmated transon matrx of hgh frequency fluctuaton that happened to be close to the border between dfferent groups at the begnnng of the perod and depcts more accurately the longrun dynamcs than usng annual data. Accordng to Table 6, the relatve CO emsson per capa results of the fve year Markov transon matrx were smlar to the one year Markov transon matrx and the lowest and hghest category (per capa emsson less than 0.5 and per capa emsson more than of the East Asan average) dsplayed hgh probables of remanng n the same category and the category around the average showed a low probably of remanng n the same category. The results also show that there was a slght ncrease n transon probables off the three dagonals that were not zero, mplyng that countres experencng more than a doublng or less than halvng of relatve CO emsson per capa ncreases slghtly over a fve year perod compared to a one year. It s reasonable to fnd ths, snce the allocated tme for CO emsson per capa to change s longer n a fve year perod. The estmated ergodc dstrbuton of the fve year transons were consstent to the results of the dstrbuton of the one year transons and dsplayed a non compressed dstrbuton around the East Asan average.

15 SHIMAMOTO K., Regonal Scence Inqury, Vol. IX, (), 07, pp Table 6. Estmates of Transon Matrx and Ergodc Dstrbuton: Relatve CO Per Capa - 5 Year Transons - Upper Endpont Upper Endpont Ergodc Snce the transon perod can affect the results, n order to predct future dstrbuton, we have based the estmated ergodc dstrbuton for the fve year transon matrces on the followng perods to compare wh the ergodc dstrbuton from 960 to 000. The perods are from 970 to 000, from 980 to 000 and from 990 to 000. As dsplayed n Table 7, the results of the estmate ergodc dstrbuton of the fve year transons for the relatve CO emsson per capa were smlar to the dstrbuton of the one year transon. For all the perods, the lowest and hghest categores had approxmately 70 percent of the countres and the two categores n the centre had approxmately 0 percent, dsplayng a non compressed dstrbuton for relatve CO emsson per capa for the East Asan countres and support the result of the dstrbuton of the one year transon. Table 7. Estmates of Ergodc Dstrbutons Based on Varous Tme Perods: Relatve CO Per Capa 5 Year Transons - Upper Endpont Tme Perod Conclusons The flyng geese model of ndustral upgradng depcts the ncome convergence or economc development convergence n East Asa. However, how does ths convergence of economc development effect the envronment? Ths paper has looked at whether envronmental convergence exsts n East Asan countres focusng on CO emsson. The surge n the consumpton of fossl fuel s causng a large ncrease n CO emsson, the man contrbutor to global warmng, whch s a serous threat to East Asan countres beng exposed to the rse n sea level along the large coastal areas. The paper conducted an examnaton of the exstence of emsson convergence for CO emsson per capa across East Asan countres. The result of the devatons, IQRs, the tme seres analyss and β convergence analyss whch tests the representatve behavour of CO emsson per capa, as well as the result of the kernel dstrbuton functon whch examnes the ntra-dstrbuton dynamcs of the emsson showed a dvergence. Further observaton of each country s CO emsson per capa showed that ths dvergence could be explaned by the hgher than average CO emsson per capa of the IES and Japan and a low CO emsson per capa mantaned by the less developed countres causng a gap between these two groups. Concernng future predcton of the convergence of CO emsson per capa, the analyss usng the Markov transon matrx suggests that the CO emsson per capa across the East Asan countres show a non compressed dstrbuton. Wh East Asan countres contnung to

16 6 SHIMAMOTO K., Regonal Scence Inqury, Vol. IX, (), 07, pp. -8 have a strong ndustral growth and nter-regonal foregn drect nvestment beng a strong characterstc of the regon, these results provde some nsght to polcy consderatons. If we consder that the countres wh hgher than average emsson per capa would adapt more strngent regulatons, polluton ntensve ndustres wh heavy polluton abatement costs could decde to relocate to countres wh less strngent regulatons. In order to prevent the behavour llustrated n the polluton haven hypothess 7 such as ths, polcy makers would requre careful monorng and regulatons. Furthermore, measures such as reducng fossl fuel related subsdes and ntroducng CO emsson tax such as polluters pay polcy could help prevent free rdng of natural resources and envronmental damage whch causes envronmental nequaly amongst countres. References Akamatsu, K Wagakun yomo kogyohn no suse. Shogyo Keza Ronson 3: 9-. Akamatsu, K. 96. A hstorcal pattern of economc growth n developng countres. Developng Economes : -3. Aldy, J. E Per capa carbon doxde emssons: convergence or dvergence? Envronmental and Resource Economcs 33: Aldy, J. E Dvergence n state-level per capa carbon doxde emssons. Land Economcs 83: Alvarez, F., Marrero, G. A. and Puch, L. A Ar polluton and the macroeconomy acorss European countres. FEDEA Documento de Trabajo 005-0, Fundacon de Estudos de Economa Aplcada. Andreon, J. and Levnson, A. 00. The smple analyss of the envronmental Kuznets curve. Journal of Publc Economcs 80: Asan Development Bank. 00. Asan Envronment Outlook 00. Manla: Asan Development Bank. Asan Development Bank Techncal assstance for the regonal envronmental complance and enforcement network. Manla: Asan Development Bank. Barro, R. J. 99. Economc growth n a cross secton of countres. Quarterly Journal of Economcs 06: Baumol, W Productvy growth, convergence and welfare. Amercan Economc Revew 76: Brdsall,. and Wheeler, D. 993 Trade polcy and ndustral polluton n Latn Amerca: Where are the polluton havens? Journal of Envronment and Development : Brock, W. A. and Taylor, M. S The Green Solow Model. BER Workng Paper o Brock, W. A. and Taylor, M. S. 00. The Green Solow model. Journal of Economc Growth 5 (): Bulte, E., Lst, J. A. and Strazcch, M. C Regulatory federalsm and the dstrbuton of ar pollutant emssons. Journal of Regonal Scence 47: Carlno, G. A., and Mlls, L. O Are U.S. regonal ncomes convergng?: A tme seres analyss. Journal of Monetary Economcs 3: Cole, M. A. and Ellott, R. J. R FDI and the capal ntensy of drty sectors: A mssng pece of the polluton haven puzzle. Revew of Development Economcs 9(4): Cole, M. A. and eumayer, E The pfalls of convergence analyss: Is the ncome gap really wdenng? Appled Economcs Letters 0 (6): Cole, M. A., Rayner, A. J. and Bates, J. M The envronmental Kuznets curve: An emprcal analyss. Envronment and Development Economcs (4): Dobson, S. and Ramlogan, C. 00. Convergence and dvergence n Latn Amerca, Appled Economcs 34: Evans, P., and Karras, G Convergence revsed. Journal of Monetary Economcs 37: Grossman, G. M. and Kruger, A. B Economc growth and the envronment. Quarterly Journal of Economcs 0: Hadr, K Testng for statonary n heterogeneous panel data. Econometrcs Journal 3: The polluton haven hypothess are supported by emprcal studes (e.g. Brdsall and Wheeler, 993; Man and Wheeler, 998; Keller and Levnson, 00; Cole and Ellott, 005).

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