Water Pollution and Economic Growth in Malaysia by Using the Simultaneity Approach

Water Pollution and Economic Growth in Malaysia by Using the Simultaneity Approach

Halimahton Binti Borhan Faculty Business Management, University Technology Mara, Malaysia Hali@bdrmelaka.uitm.edu.my, halimahton2001@yahoo.com Elsadig Musa Ahmed Faculty of Business and Law, Multimedia University, 75450 Melaka, Malaysia. asadiq29@hotmail.com, elsadigmusa@yahoo.com

ABSTRACT In the study by Valeria (2006), in the estimation of the environment and GDP relation, it has rarely been considered that variables involved could be simultaneous. This is supported by Coondoo and Dinda (2002), they tested the causality process between income and CO2 emission and showed that there is a simultaneous relationship that occurs. Being different from Shen (2006), this study formulates four simultaneous equations method by estimating the population density as one of the endogenous variable. The objective of the study is to examine the relationship between economic growth and different indicators of water pollution in Malaysia and to make improvement of the EKC model through extension and approach of simultaneity. Water pollution indicators were assessed on a number of measures: BOD, CADMIUM and ARSENIC. The income level per capita GDP (Gross Domestic Product) per capita were measured from the year 1996 to 2006. This study contributes to the available literature by Shen (2006) by modifying this model and extends it to include variables such as the number of university graduates, local labor, foreign labor, foreign direct investment and government spending. Based on the estimated results, this study finds that the differences between the single polynomial equation model and the simultaneous equations model do exist. This study confirms that there is a simultaneous relationship between pollutants and economic growth in Malaysia and it is following the concept of Environmental Kuznets Curve (EKC). It is confirms that there is an Environmental Kuznets Curve for water pollutants in...