Impact of GDP, gross capital formation and employment on waste generation - The case of EU regions

Abstract

The impact of economic growth on environment (including waste generation) has remained a bone of contention and continuously debated in both public as well as political platforms. Studies on waste generation into the economic system have also attracted increased attention nowadays with a significant focus on its negative effect on our environment. Similar to economic growth and waste generation, the contribution of waste into the economic system can also be attributed to increasing both gross capital formation and employment rate. In previous literature, these relationships have been studied at the national level which may lead to biased results due to the spatial scale mismatch. Therefore, here we study the data for 217 EU regions for the years 2000-2013. Using panel cointegration tests, we find that cointegration is present between total waste per capita, GDP per capita, employment rate and gross fixed capital per capita formation. We further investigate both short and long run Granger causal relationships between waste generation and GDP, employment rate likewise gross fixed capital formation. Specifically, a panel vector error correction model (VECM) is estimated to perform Granger causality tests. The results indicate that there is a unidirectional short run effect from GDP, gross fixed capital formation and employment rate. In addition, there is a unidirectional long run Granger causality running from GDP, employment rate and gross fixed capital formation to waste generation into the economic system.