Economic and environmental performances in manufacturing industries: A comparative study

Abstract

The paper empirically investigates the dynamic relationships between economic and environmental performances in manufacturing industries on a comparative basis in India and China. The economic performance is generally measured by production and export. Manufacturing sector plays a crucial role in terms of GDP and export both in India and China due to existence of their emerging markets. The rapid export-led economic growth with remarkable contributions of manufacturing industries in India and China also raise the question of their environmental performances nowadays. In this context, environmental effect of manufacturing performances measured by the CO₂ emission is a serious concern for both countries. The study is conducted within a causality framework by using World Bank data on Indian and Chinese economy from 1970 to 2016. Several unit root tests are conducted for all time series variables before applying the Johansen co-integration test followed by vector auto regression models to find their causal relationships. Findings show a unidirectional causal linkage between manufacturing production and CO₂ emissions in both countries, the degree of the effect of manufacturing sector on CO₂ emissions is remarkably higher in China than in India. Manufacturing export is also found as a significant factor in high level of CO₂ emissions in China.