The purpose of this paper is to examine the linkage between environmental challenges, multinational corporations (MNCs) activities, trade and energy in Africa; and further elaborate on the role of institutions, as an intervening variable.
In this study, the authors extended the Environmental Kuznets Curve (EKC) model by including indicators of the presence of MNCs, trade and energy in the basic EKC model that has measures of environmental pollution (CO2), economic growth (gross domestic product per capita) and its squared value. The role of institutions was also considered and included as an inter-mediating variable. This model was tested on a sample of 27 African countries, for the period 1996-2010. The systems GMM was applied for the empirical analysis. This approach was aimed at circumventing the possibility of reverse causality and endogenous explanatory variables-such as institutions.
Trade and MNCs’ activities may not have much contemporaneous impact on the environment. However, their lagged values have adverse and significant influence on the current values of environmental challenge. This implies that environmental policies regarding trade and MNCs require time response lag. Energy was significant only at contemporaneous value but not at its lagged value. Institutional development helps to suppress the negative excesses (like pollution) from the activities of trade, MNCs and energy, and consequently reduce environmental pollution.
This paper included the role of institutions in the environmental pollution, trade, MNCs and energy debate. Empirical studies in this regard have inadvertently excluded this variable, but have, at best, included it as part of policy recommendations.
The useful comments from the anonymous reviewers are appreciated. The first version of this paper was presented at 14th Summer Workshop for Young Economists on Trade and the Environment organized by the Centre for European Economic Research, Mannheim, Germany, 12-16 October, 2012. We acknowledge the useful comments from the resource persons and participants at the workshop as well as the sponsoring of the full cost of participation by the organizers. The first author appreciates the research fellowship from Alexander von Humboldt Foundation under its Georg Forster Research Fellowship for Postdoctoral Researchers and the supports from his host institution-German Development Institute, Bonn for providing a friendly work environment.
Osabuohien, E., Efobi, U.R. and Gitau, C.M. (2015), "Environment challenges in Africa: further dimensions to the trade, MNCs and energy debate", Management of Environmental Quality, Vol. 26 No. 1, pp. 118-137. https://doi.org/10.1108/MEQ-04-2014-0058
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