An empirical study of the environmental Kuznets curve for environmental quality in Gansu province

The Environmental Kuznets Curve (EKC) can be defined as a significant tool dedicated to explore the relationship between economic development and environment degradation. And EKC empirical studies usually confirm an inverted U-shaped relationship between some pollutants and per capita income. However, pollution load indicators seem insufficient to represent environmental quality comprehensively. Therefore, the empirical study of EKC for environmental quality, which confirms a U-shaped relationship has been conducted in Gansu province, China. What is more, time series econometric methodologies were used to take environmental quality as endogenous variable, and Bayesian methods were employed to deal with the trouble of overfitting problem. Based on the empirical data of Gansu province from 1980 to 2012, the cointegration equation derived from Bayesian VAR with Minnesota prior shows the optimal estimation. And the results have shown that the EKC for environmental quality in Gansu province was verified. It proved that it is possible for low-income economy to improve environmental quality rather than at the cost of being poorer. Technical effect and environmental regulations may play important roles for the decline of the curve. In addition, impulse response analysis indicates that the efforts to protect and restore environment means prospect of long-term earning.