Addis Ababa University School of Graduate Studies The
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ADDIS ABABA UNIVERSITY SCHOOL OF GRADUATE STUDIES THE EFFECT OF ECONOMIC GROWTH AND ENERGY CONSUMPTION ON CARBON DIOXIDE EMISSION IN 14 SELECTED EAST AFRICAN COUNTRIES: EVIDENCE FROM PANEL-ARDL BY DEMISSE JARSA JUNE, 2019 ADDIS ABABA, ETHIOPIA i THE EFFECT OF ECONOMIC GROWTH AND ENERGY CONSUMPTION ON CARBON DIOXIDE EMISSION IN 14 SELECTED EAST AFRICAN COUNTRIES: EVIDENCE FROM PANEL-ARDL DEMISSE JARSA WOTANGO A Thesis Submitted to The Department of Economics Presented in Partial Fulfillment of the Requirements for the Degree of Masters of Science in Economics (MSc in Resource and Environmental Economics) Addis Ababa University Addis Ababa, Ethiopia June, 2019 ii Declaration First, I know plagiarism is to cope and use another’s works and claim that it is owns work, which is wrong Second, this submitted thesis project is my own work and each and every contribution to, and quotation in it from the works of other people has been cited and referenced Third, I have not permitted, and will not permit, anyone to copy my work with the intention of passing it off as his or her own work Finally, I acknowledge that copying someone else work or parts of it is wrong, and declare that it is my own work Signature………………………………….. iii Addis Ababa University School of Graduate Studies This is to certify that the thesis prepared by DEMISSE JARSA, entitled: The effect of energy consumption and economic growth on carbon dioxide emissions in 14 selected African countries: Evidence from panel-ARDL and submitted in partial fulfillment of the requirements for the degree of Master of Science in resource and economics complies with the regulations of the University and meets the accepted standards with respect to its originality, quality and contribution. Approval by board of Examiners: Examiner ___________________________ signature ____________ date __________ Examiner ___________________________ signature ____________ date __________ Advisor ____________________________ signature ____________ date ___________ ___________________________________________________________________________ Chair of department or graduate program coordinator iv Acknowledgment First of all, I would like to thank the Almighty God being he permitted me for this date and successful completion of this study. Next, I am deeply indebted to my supervisor Dr. Tekie Alemu for his guidance, suggestions and constructive comments throughout the work. His good treatment gives me the courage to finalize this study and inspiration to be a better academician. I would like to express wholehearted, deep gratitude to my family(Ayya enjera enate, Etiyye enate, Abba abate, Borra talaku wondimme, Tulla talkua ehitte and tiska taneshu wondime) - it’s your effort and dedication to educating me that always strengthen me to pass all those difficult stages and complete my study. Tamme and Tasfa and all other friends too, deserve my gratitude. I would also like to thank all my classmates for the wonderful time we had together. Dilla University also deserves great thanks for sponsoring my study for two years at Addis Ababa University. i Table of contents Contents page number Acknowledgment ........................................................................................................i List of Figures ............................................................................................................ v List of Tables ........................................................................................................... vi Abbreviations ............................................................................................................................vii Abstract ...................................................................................................................... x CHAPTER ONE ........................................................................................................................................... 1 INTRODUCTION ........................................................................................................................................ 1 1.1 Background of the study ............................................................................................................... 1 1.2 Statement of the problem .............................................................................................................. 5 1.3 The objective of the study ............................................................................................................. 7 1.4 The hypothesis of the study .......................................................................................................... 7 1.5 Significance of the study ............................................................................................................... 8 1.6 Structure of the study .................................................................................................................... 8 CHAPTER TWO .......................................................................................................................................... 9 REVIEW OF THE THEORETICAL AND EMPIRICAL LITERATURE .................................................. 9 2.1 Theoretical Literature .................................................................................................................... 9 2.1.1 Economic growth and the natural environment .................................................................... 9 2.1.2 Energy and Economic growth ............................................................................................. 13 2.1.3 Energy and the natural environment ................................................................................... 14 2.2 Review of the empirical literature ............................................................................................... 16 2.2.1 Studies in the first strand of literature ................................................................................. 16 2.2.2 Studies in the second strand of literature ............................................................................ 18 2.2.3 Studies in the third strand of literature ................................................................................ 20 CHAPTER THREE .................................................................................................................................... 28 DESCRIPTIVE STUDY ............................................................................................................................. 28 3.1 Introduction ................................................................................................................................. 28 3.2 Types, sources and measurement units of the data ..................................................................... 28 3.3 Trend analysis ............................................................................................................................. 29 3.3.1 Trend of economic growth in the countries under study ..................................................... 29 ii 3.3.2 Trend of demographic growth in the countries under study ............................................... 34 3.3.3 Trend in energy consumption in the countries under study ................................................ 36 3.3.4 Trend of carbon dioxide emission in the countries under study ......................................... 38 3.4 Descriptive analysis .................................................................................................................... 42 3.4.1 Descriptive statistics by country ......................................................................................... 42 3.4.2 Descriptive statistics in the panel ........................................................................................ 43 CHAPTER FOUR ....................................................................................................................................... 46 METHODOLOGY ..................................................................................................................................... 46 4.1 Introduction ................................................................................................................................. 46 4.2 Description of the model variables and expected sign ................................................................ 46 4.3 Model specification ..................................................................................................................... 48 4.4 The methodology of the study .................................................................................................... 50 4.5 Estimation procedure .................................................................................................................. 53 4.5.1 Panel unit root test............................................................................................................... 53 4.5.1.1 Im, Pesaran and Shin (2003) test………………………………………………54 4.5.1.2 Fisher-ADF and Fisher-PP tests………………………………………….…….55 4.5.2 Panel co-integration test ...................................................................................................... 56 4.5.2.1 Kao (1999)-Residual based test……………………………………..…….……61 4.5.3 Panel-ARDL model............................................................................................................. 62 4.5.4 Optimal Lags Selection ......................................................................................................