The Impact of GDP Per Capita and Crime Rate on the C02 Emission
The study aims to examine empirically the impact of GDP per capita as well as crime rate on the carbon emission. Because these variables are endogenously determined we use Panel VAR methodology. The study contributes to the literature by examining the nexus. among the carbon emission, the crime rate and the GDP per capita. The study links the crime rate (homicide rate) to economic incentives (GDP per capita) as well as quality of life proxied by environmental degradation. Additionally, we link the GDP per capita to the crime rate as well as environmental degradation. Moreover, we link the environmental degradation to economic and crime related incentives. For the purpose of the study, we use data for 21 European countries over the period 1996-2014. Panel granger causality tests indicate that there is a bi-directional causality between GDP per capita and homicide whereas there is a unidirectional causality from carbon emission to GDP, and from carbon emission to homicide. Moreover, according to forecast error variance decomposition results carbon emission has great explanation power (40 %) in explaining variance of the GDPPC whereas the greatest explanation power in explaining the variance of GDPPC is itself. On the other hand, greatest portion of variances of homicide and carbon emission are explained by themselves. Impulse response analysis shows that response of homicide to a one time, one standard deviation in GDP per capita is negative significant whereas response of carbon emission isn’t significant. Response of GDP per capita to a one time, one standard deviation innovation in homicide is negative whereas response of carbon emission isn’t significant. Response of GDP per capita to a one time one standard deviation innovation in carbon emission is positive, and response of homicide is positive. The result particularly emphasizes that carbon emission have positive, negative consequences.
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