Simultaneity of Water Pollution and Economic Growth in Malaysia

Abstract

The objective of the study is to examine the relationship between economic growth and different indicators of water pollution in Malaysia and to improve on the Environmental Kuznets Curve model by using an extended simultaneity model. This study formulates four simultaneous equations with population density as one of the endogenous variables. Water pollution indicators were assessed based on the level of BOD, cadmium and arsenic. The period of study is 1996 to 2006. This study extended the model of Shen (2006) by including variables such as the number of university graduates, local labour, foreign labour, foreign direct investment and government spending. Differences were found between the single polynomial equation model and the simultaneous equations model. Our study confirms that there is a simultaneous relationship between pollutants and economic growth in Malaysia and that it follows the concept of the Environmental Kuznets Curve. The Environmental Kuznets Curve is therefore relevant for water pollutants in Malaysia.