Population Ageing, Income Growth and CO2 Emission: Empirical Evidence from High Income OECD Countries

Abstract

Purpose – The purpose of this paper is to attempts to explore the relationship between population ageing, income growth and CO2 emission in 25 high-income Organization for Economic Cooperation and Development (OECD) countries in the framework of environmental Kuznets curve (EKC). Design/methodology/approach – Following Zagheni (2011) and using a relatively new cointegration technique and fully modified ordinary least square in a panel data over 1980-2009 the empirical results find evidence of inverted-U shaped EKC in these OECD countries. Findings – The empirical results demonstrate that per capita CO2 emission (PCCO2) increases initially with economic growth; however, after reaching a per capita income level of US$ 24,657 it starts falling. With regard to ageing, the cointegrating vector indicates that a one percent increase in the share of aged population will reduce PCCO2 by 1.55 percent in the long run. Originality/value – This is one of the first studies that examine the effect of population ageing on CO2 emission in a panel setting. The paper consider the cross-sectional dependence and use unit root test suitable for cross-sectional-dependent variables. The paper also examine short-run and long-run dynamics of EKC with panel cointegration and panel error correction methods.