Ecological footprint and real income: Panel data evidence from the 27 highest emitting countries

- Panel data of 27 leading emitting countries is analyzed.
- Group DOLS and GM-FMOLS methods are applied for estimation.
- Ecological footprint per capita has significant long-run association with real income and trade openness.
- A unidirectional causal link running from real income to ecological footprint is also observed.

This study examines the effects of real income, financial development and trade openness on the ecological footprint (EF) of consumption using a panel data of leading world EF contributors during the period 1991-2012. A number of panel unit root tests confirm that the data are first-difference stationary. Results from Pedroni co-integration tests show that the variables are co-integrated. The panel dynamic ordinary least squares (DOLS) method is then employed to estimate the long run association between the variables. The results indicate a positive and significant association between ecological footprint (EF) and real income, and a negative and insignificant impact of trade openness on EF. Financial development is also observed to reduce EF. Afterwards, the group-mean fully modified ordinary least squares method is applied to check the robustness of the DOLS estimates. The findings are partially robust as only real income confirms the positive significant impact on EF. In addition, the vector error correction model supports a unidirectional causal impact running from real income to EF. Finally, findings from variance decomposition analysis and impulse response functions reveal that real income will have an increasing effect on EF for the selected countries into the future.