A Composite Impact of Urbanization and liberalization on

Environmental Degradation in Developed and Developing Economies

FAIZ UR RAHIM1, TAHIRA NIAZ1, SANIA SHAHEEN1,2, MADIHA ASMA1, LAL K. ALMAS2

1International Institute of Islamic Economics (IIIE), International Islamic University Islamabad,

PAKISTAN

2Department of Agricultural Sciences, Paul Engler College of Agriculture & Natural Sciences,

WTAMU, Canyon, Texas,

USA

Abstract: Now a days, urbanization and liberalization play a crucial role in environmental degradation.

However, the composite impact of urbanization and liberalization on environmental degradation is missing in

the existing literature. To cover this gap, the current study used the annual panel dataset of 103 developed and

developing countries over the period from 1980 to 2018, to empirically investigates the composite impact of

urbanization and liberalization on environmental degradation. For estimation purposes, this study employed the

fixed, Random effect, Least Square Dummy Variables (LSDV), and 2SLS approach. The study results indicate

that the composite impact of globalization and urbanization have a positive effect on CO2 emissions in

developed economies, which explains that globalization speeds up urbanization with increasing carbon

emissions. Furthermore, the results show that globalization is linked to urbanization through trade, economic

growth, capital-labor ratio, and financial integration in developing economies by reducing the environmental

quality. Based on estimates results, the current study recommends that a comprehensive policy is required for

urban improvement and for the creation of smart cities to decrease the urbanization influence on environmental

pollution.

Keywords: Urbanization, Liberalization, Environmental Degradation, Least Square Dummy Variable (LSDV),

Two-Stage Least Square (2SLS).

Received: July 29, 2021. Revised: May 21, 2022. Accepted: June 10, 2022. Published: June 24, 2022.

1 Introduction

The relationship between environment and economy

has been unavoidable since the beginning of life. It

not only provides resources but also acts as a sink

for emissions and waste. The environment and

economic growth have a complex relationship with

each other. Economic growth works with different

drivers that come into play, such as the scale of the

economy, urbanization, and globalization. This

century has experienced a greater migration of the

world’s population to urban dwellers. However,

urbanization refers to a general increase in the city's

population. There are many causes of urbanization

but one of the reasons that forces people to move

from rural areas to cities is more job opportunities.

A few of the most essential reasons are

industrialization, better education, social benefits,

services, employment opportunities,

modernizations, and changes in lifestyle [1]

The movement of people from rural to urban has

both positive and negative effects. However,

increasing urbanization is inevitable; therefore,

urbanization issues depend on effective planning,

development, and infrastructural management. This

unplanned population growth is associated with

population demands that supersede infrastructure

and service capabilities, leading to environmental

degradation [2].

The different historical patterns and

backgrounds of economic development and

urbanization may create significant contrasts in the

expression of the urban stream syndrome among

high-income and low-income countries [3,4,5].

According to a UN report, the population of world

cities was 34% in 1960. There is a consistent growth

in the urban population, but in 2014 it jumped to

54% and is expected to reach 66% by the end of

2050 [6]. Generally, there are two causes of urban

growth. One is due to natural growth as we

experienced in the last three decades birth rate has

improved due to advancements in medical terms.

The other major factor is migration when people

move from one place to another place. Migration is

the result of economic growth, development, and

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technological changes [7] and possibly also conflict

and social disruption. Migration is driven by pull

and push factors that drive rural areas away from

urban areas. Also, in cities, there are somehow

better job opportunities which is one of the major

pull factors.

Urbanization also has positive impacts on the

environment. The cluster of economic and human

resources, gathered in place, helps to stimulate

innovation and development in business, science,

technology, and industry. Relatively simple

approaches to health, education, social services, and

cultural activities are more readily available to

people in urban areas than rural areas [8]. On the

other hand, population density in cities makes it

easier and cheaper for government and public

services to provide basic goods and services [9].

The rapid growth of the urban population often

creates an urban sprawl with negative economic,

social, and environmental consequences. In

Ethiopia, the increase in the urban population often

strains the capacity of local and national

governments to provide urban residents with even

the most basic water supply, sewerage, and solid

waste disposal [10] are some of the negative

impacts of urbanization on the environment.

Population growth in cities can also affect the

broader regional environments. These regions

downwind of huge and congested industrial areas

also cause an increase in the amount of

precipitation, air pollution, and the increase in the

number of days of thunderstorms. Urbanization not

only affects weather patterns but also leads to

changes in the pattern of runoff water. Perhaps the

urban area due to pollution generally generates more

rain, but indeed the infiltration of water lowers the

water tables. That means that this runoff happens

faster with higher peak flows. This has led to an

increase in the volume of floods and water pollution

that occurs downstream.

Globalization is not a new terminology that is

used nowadays. From the beginning of civilization,

communalities have had a habit of trading among

each other with their surplus of goods and services.

With advancements in cultures, they were able to

travel farther afield to trade their goods for desirable

products found elsewhere. Liberalization or

globalization in economics refers to the process by

which organizations, businesses, and countries

begin to operate internationally.

Globalization is most commonly used in an

economic context, but it is also affected culturally

and politically. Thus, in general, globalization has

been shown to raise living standards in both

developed and developing countries. On the other

hand, some analysts warn that globalization may

harm local or emerging economies and individual

workers. The positive impact of globalization is that

it also helped to increase the movement of raw

materials and food from one region to another.

Previously, populations used only locally grown

food, but globalization has given the privilege to

consume products that have grown in other

economies

Liberalization is being considered as most

widely represented in debates on environmentalism,

and green activists have highlighted to its far-

reaching effects. Activists have pointed out that

liberalization has led to an increase in the

consumption of goods and services, which has

impacted the ecological cycle. An increase in

consumption of goods and services mean or leads to

an increase in manufacturing of goods and services

which in turns automatically puts pressure on the

environment. Liberalization is a global phenomenon

that affects human well-being through its effects on

the socio-economic and political aspects of human

life [11]. It improves economic well-being through

trade, capital flows, the diffusion technology, and

even cultural and public policies [12]

Liberalization stimulates economic growth

through trade openness and financial capital, but it

has far-reaching environmental consequences across

economies [13]. Moreover, developing countries are

more interested in increasing the size of their

business activities in urban areas.

On the other hand, there is an increase in

pollution due to urbanization and liberalization with

the rest of the world. This implies that urbanization

and liberalization can be significant indicators of

environmental degradation. However, to put it

another way, importing technology and energy can

be beneficial for production and economic activity,

but the imported energy and technology are

carbon emission-free in developing countries.

Additionally, economic development through

rapid industrialization and urbanization causes

environmental pollution positively. Urbanization

has promoted the transfer of labor from rural to

urban areas, resulting in economic transformation in

several countries [14]. However, urbanization has

improved living standards and expanded job

opportunities with the negative effect of

increasing CO2 emissions.

Interestingly, many researchers have analyzed

the environmental degradation hypothesis with the

importance of urban growth and globalization and

panel-specific studies. All these studies report

mixed results regarding their dynamic

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characteristics. Accordingly, the first group found

that liberalization reduces pollution in their

studies ([15], [16], [17], [18], [19], [20] and [21]

but neglects the importance of urbanization. While

the group of other researchers ([22], [23], [24] and

concluded that urbanization increase CO2 emissions

worldwide.

From the review of literature, it has been noted that

very limited studies have analyzed the impact of

liberalization, urbanization, and environmental

degradation in the context of developing countries.

[25] discussed the issue of environmental

degradation and economic growth. [26] examined

that financial instability increases in environmental

degradation evidence from Pakistan. Consequently,

few studies have focused on the reality of the

liberalization effect on urbanization which is

accompanied by environmental degradation.

Although, other studies have not considered

structural breaks in environment, liberalization, and

urbanization. The empirical estimates can be

misleading and estimations through econometric

methods may include biases in the presence of

structural breaks [27],[28],[29]. Based on the

opposing arguments in the existing literature, it is

important to review the empirical studies conducted

on the environmental degradation hypothesis.

Hence, to overcome the abovementioned gaps, this

study aims to examine the following objectives: i)

To explore a composite impact of urbanization and

liberalization on environmental degradation in

developed and developing countries. ii) To conduct

a comparative analysis of environmental

degradation between developing and developed

countries. The current study investigates these

relationships between developed and developing

countries over the period from 1980-to 2017.

This study will be beneficial for policymakers in

developing countries. Policymakers will make a

better decision regarding environmental

degradation. This study offers a new look at

environmental degradation from today's perspective.

Especially, based on this study, all developing

countries can draw important conclusions regarding

the context of liberalization and urbanization. This

study will also be beneficial for policy reviewers

and researchers to understand the dynamics and

behavior of liberalization and urbanization and their

impact on environmental degradation in developing

countries.

The general intention of the study is to compare

the composite impact of urbanization and

liberalization on environmental degradation in both

developed and developing countries. In addition,

this study will also serve to explore the significant

impact of the composite interactive factor to explore

urbanization and liberalization on environmental

degradation.

The remaining section of this study is arranged as

follows: section 2, describes the material and

methods. Section 3, discusses the results and

discussion. Lastly, concludes the study results and

suggests some policy recommendations.

2 Material and Methods

2.1 Empirical Model

The current study examines the effect of

liberalization and urbanization on environmental

degradation using the following functional form of

the model followed by [30],[31],[32],[28],[33].

𝐸𝐷𝑖𝑡 = 𝑓(𝑈𝑅𝐵𝑖𝑡 , 𝐿𝐼𝐵𝑖𝑡 , 𝐺𝐷𝑃𝐶𝑖𝑡 ,𝐹𝐷𝑖𝑡 , 𝐼𝑁𝐷𝑖𝑡) (1)

Where ED denotes the environmental

degradation such as CO2 emissions, 𝑈𝑅𝐵 denotes

urbanization, LIB is the liberalization. In this model

we also include the control variables such as GDPpc

is the GDP per capita, FD is the financial

development, and IND denotes the industrialization

that also affects the environmental degradation,

respectively.

The abovementioned relationship between

liberalization and urbanization on environmental

degradation can also be written in panel equations.

The ordinary least squares (OLS) regression without

dummy variables, a pooled regression model,

assumes a constant intercept and slope. The

econometric form of the model has been formulated

as follows:

𝐸𝐷𝑖𝑡 = 𝛽0+ 𝛽1𝑈𝑅𝐵𝑖𝑡 + 𝛽2𝐿𝐼𝐵𝑖𝑡 + 𝛽3𝐺𝐷𝑃𝑝𝑐𝑖𝑡 +

𝛽4𝐹𝐷𝑖𝑡 + 𝛽5𝐼𝑁𝐷𝑖𝑡 + 𝜀𝑖𝑡 (2)

where, i = number of countries, t = time

period (1990-2018). Similarly, 𝜀𝑖𝑡 is the error term,

respectively. We used the interaction term

(URB.LIB), then our model becomes like this.

𝐸𝐷𝑖𝑡 = 𝛽0+ 𝛽1𝑈𝑅𝐵𝑖𝑡 + 𝛽2𝐿𝐼𝐵𝑖𝑡 + 𝛽3(𝑈𝑅𝐵. 𝐿𝐼𝐵𝑖𝑡 ) +

𝛽4𝐺𝐷𝑃𝑝𝑐𝑖𝑡 + 𝛽5𝐹𝐷𝑖𝑡 + 𝛽6𝐼𝑁𝐷𝑖𝑡 + 𝜀𝑖𝑡 (3)

Similarly, our model also used the time-specific

dummies known as Least Squares Dummy Variable

(LSDV). The new extended model is:

𝐸𝐷𝑖𝑡 = 𝛽0+ 𝛽1𝑈𝑅𝐵𝑖𝑡 + 𝛽2𝐿𝐼𝐵𝑖𝑡 + 𝛽3(𝑈𝑅𝐵. 𝐿𝐼𝐵)𝑖𝑡 +

𝛽4𝐺𝐷𝑃𝑝𝑐𝑖𝑡 + 𝛽5𝐹𝐷𝑖𝑡 + 𝛽6𝐼𝑁𝐷𝑖𝑡 + 𝛼𝑖+ 𝜀𝑖𝑡 (4)

2.2 Estimation Methods

For estimation purposes, we have used the panel

estimation techniques such as fixed effect (FE) and

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random effect (RE). Additionally, the Hausman test

has been used to identify whether FE is more

appropriate or RE is more appropriate. Further, in

this study, we have used the LSDV regression and

two-stage least square (2SLS) regression analysis.

LSDV regression is the ordinary least square (OLS)

regression equation with dummy variables.

Two-Stage Least Squares (2SLS) regression

analysis is a statistical tool that is applied in the

analysis of structural equations. Hence this

technique is an extension of the OLS method. It is

mainly used when the dependent variable error

terms are correlated with independent variables.

Several ways help to lessen simultaneity bias, but

the most regularly used in econometrics as an

alternative to OLS is called 2SLS. 2SLS is a method

of avoiding simultaneity bias by systematically

creating variables to replace the endogenous

variables where they appear as independent

variables in simultaneous equations systems.

2.3 Data Sources and Variables Description

This study used a balanced panel of annual data

which includes 103 developed and developing

countries for the period 1990–to 2018. All variables

data has been taken from the published source of

World Development Indicator (WDI) except

globalization.

Globalization data has been taken from the KOF

Index of Globalization (2018) dataset. We have

taken overall globalization into three components:

economic, social, and political globalization.

Moreover, economic globalization has been used as

a proxy for economic liberalization. The list of

countries is given in appendix-A1. Countries have

been selected based on data availability.

Table1. Variables Description

Variables

Description

Unit

Data Source

Environmental

degradation

(used as a proxy

of CO2

emission.

Metric tons

per capita

WDI

URB

Urbanization

Percentage of

the urban

population to

total

population

WDI

Economic

Liberalization is

used as a proxy

of economic

globalization

overall

globalization

taken into

three

components:

economic,

social, and

political

globalization.

KOF

Index of

Globalization

(2018)

dataset

GDPpc

GDP per capita

GDP as

percentage of

growth

WDI

Financial

Development

Broad money

as a percentage

of GDP

WDI

IND

Industrialization

Manufacturing

value-added

percentage of

GDP

WDI

Source: Author’s own collections

3 Results and Discussion

The results consist of developed and developing

economies. First, we report the estimates of

developed economies using the FE, RE, LSDV, and

2SLS methodology in Table 2.

Table 2. Environmental Degradation in Developed Countries: Role of Urbanization and liberalization

Variables

Model 1

Model 2

Model 3

Model 4

LSDV

2SLS

-0.008

(0.046)

-0.010

(0.046)

-0.013

(0.047)

-0.220***

(0.076)

URB

0.785***

(0.123)

0.783***

(0.123)

0.783***

(0.122)

1.404***

(0.204)

EG*URB

0.983***

(0.234)

0.984***

(0.233)

0.974***

(0.235)

1.553***

(0.244)

IND

-0.220***

(0.029)

-0.218***

(0.029)

-0.236***

(0.029)

0.929***

(0.142)

GDP

0.064***

(0.014)

0.065***

(0.014)

0.075***

(0.014)

0.338***

(0.039)

-0.028**

(0.014)

-0.027*

(0.014)

-0.031**

(0.014)

0.141***

(0.030)

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Y1980

0.106***

(0.031)

Y1990

0.004

(0.030)

Y2000

0.059*

(0.031)

Y2010

-0.026

(0.031)

Y2018

-0.117***

(0.031)

Constant

7.889***

(0.528)

7.888***

(0.618)

7.868***

(0.524)

-0.454

(1.279)

Obs

1,170

R-square

0.286

0.376

0.305

0.298

No of code

Hausman test

5.05**

Notes: Standard errors in parentheses. The significance of coefficients at the 10%, 5%, and 1% levels are shown by *, **, and

***, respectively.

The first column of Table 2 shows the FE model

results, which explains that the coefficient of

economic globalization is statistically insignificant

for developed countries. While a similar result is

found in the RE model (Column 2), the coefficient

of urbanization is positive and significant in both FE

and RE regression models. It implies that a 1 %

increase in urbanization causes a 78.5% increase in

carbon emissions in developed countries.

Further, a composite impact of globalization and

urbanization has a positive effect on CO2 emissions

in developed economies under both FE and RE

models, which indicates that globalization speed up

urbanization with increasing carbon emissions. This

also means that globalization connects with

urbanization through trade, economic growth,

capital-labor ratio, and financial integration in

developed economies by lowing the environmental

quality. This result is also consistent with [34],[35],

which infers that urbanization improves the

economy by increasing transportation with rising

traditional and modern energy consumption, which

enhances the CO2 emotions. Fast speed in

urbanization can affect energy use, economic

activities, and carbon emissions. However, previous

literature reports mixed results regarding the

relationship between urbanization and CO2

emission, but our finding confirms the positive

effect of urbanization on carbon emissions. One of

the possible reasons is that urbanization is related to

economic activity, which explains that higher

economic activity creates wealth and richer

residents often demand more energy apparatuses

products which can upsurge environmental

pollution.

The coefficient of GDP is positive and

significant in both FE and RE regression models.

Our results also show that industrialization has a

negative effect on carbon emissions under both FE

and RE models.

The variable, financial development, is negative and

significant in both FE and RE models, which

indicates that financial development has a negative

influence on carbon emissions. This result explains

that an increase in financial development improves

the clean and green energy in developed economies

which in turn decreases environmental pollution.

Lastly, we compare FE and RE models. The

result of the Hausman test shows that the fixed

effect is the best-fitted model in our analysis

Additionally, the current study estimates the

results by using LSDV method to determine the

relationship between, economic globalization,

urbanization, and economic growth. The advantage

of using LSDV over FE/RE is that it considers the

time dummy effect in the analysis which is more

important in real analysis. The results of LSDV test

explain that the coefficient of economic

globalization coefficient remains negative and

insignificant. While urbanization has also similar

results in LSDV method, which means that

urbanization has increased the environmental

pollution.

Further, a composite impact of globalization and

urbanization has a similar effect on CO2 emissions

as in previous models. The same results are also

found for industrialization, GDP, and financial

development in LSDV model.

The results also show that the dummy year

(1980) has a positive effect on carbon pollution

while over the period, the time effect on the

environmental pollution is changed from positive to

negative in the dummy year (2018) under LSDV

model.

This also means that environmental pollution is

decreasing in developed economies with the passage

of time.

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Finally, we apply the 2SLS method to improve

our findings by dealing the potential endogeneity

problem. The possibility of endogeneity due to

reverse causality, measurement error, and omitted

variable biases. Therefore, in the presence of

endogeneity FE, RE, and LSDV estimates become

inefficient and biased. Therefore, to address the

problem of endogeneity, we apply the 2SLS in our

analysis for better results. The results of 2SLS are

given in Column 4.

The 2SLS model result explains that the

coefficient of economic globalization is negative

significant at 1 % level, which reveals that a 1 %

increase in economic globalization leads to a

decrease in carbon emissions by 22.0 %. This

implies that globalization is a global phenomenon

that affects environments through socio-economic-

political aspects of human life. Globalization also

stimulates economic activities through financial,

trade openness, and FDI, but it has also considerable

environmental quality consequences across

economies. This result is conclusive with [36] which

stated that globalization is one of the main factors

that enhance the environmental health quality for

developing and developed countries and worldwide

it has various consequences. The variable,

urbanization, the result is similar to the previous

models. However, the interesting finding is that the

industrialization coefficient is turned negative to

positive in 2SLS. This implies that a 1% increase in

industrialization has a 92.9% increase in carbon

emissions in developed economies. While the

composite impact of globalization and urbanization

result has been maintained in 2SLS. This also infers

that industrialization is also one of the main sources

of environmental pollution in advanced economies.

However, the result of variable GDP is similar in

2SLS while the coefficient of financial development

changes signs from negative to positive in 2SLS.

This indicates that as financial development

increases it leads to an increase the environmental

pollution.

Next table 3 explains the impact of urbanization

and globalization on environmental pollution in the

context of developing economies. The results are

based on FE, RE, LSDV, and 2SLS estimators.

The first column of Table 3 shows the FE

results, which indicate that the coefficient of

economic globalization is statistically positive and

significant for developing countries. We have found

similar results in the RE model in Column 2. The

results also show the positive influence of economic

globalization on environmental pollution, which

indicates that trade and technology innovation

enhances environmental pollution by hurting the

trade and technology policies related to control of

air quality and world environment concerns.

Further, economic globalization is an essential

determinant of environmental pollution as supported

by [37], [38], [39],[40]. Developing economies also

obtain ecological benefits from economic

globalization via access to energy-saving and

energy-efficient innovative machinery from

developed nations. This is very helpful in

environmental quality. However, our result is

contradicting these facts. Another explanation is that

globalization enables nations to attain trade and

environmental benefits from these resources. This

also implies that globalization allows developing

economies to enlarge their industrial sector

production at the cost of environmental quality.

The estimated results also show that the effect

of urbanization is positive and significant in FE and

RE regression models. It implies that a 1 % increase

in urbanization leads to an increase carbon

emissions by 1.55% in FE and 1.545% in RE

regression model.

Table 3. Environmental Degradation in Developing Countries: Role of Urbanization and liberalization

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This also implies that globalization has also

stimulated urbanization in developing economies

which is a possible source of environmental

pollution. This shows that globalization has created

an increasing level of interdependence in

urbanization, which is one of the sources of air

pollution in a new era. We also found that

globalization affects CO2 emissions through

urbanization in composite forms. Our results

revealed that industrialization has a negative

effect on carbon emissions in developing

economies while similar results have been

found in developed economies. However, the

effect of GDP is positive and significant in FE

and RE regression models, this means that

economic activity is more producing

environmental pollution. Financial

development has a positive and significant

influence on carbon emissions which implies that

an increase in financial development improves the

fossil fuel energy in developing economies which

in turn increases environmental pollution. In the

end, the Hausman test shows that the fixed effect is

significant and our preferred model and gives better

estimates our estimates.

We also estimate our model by using the

LSDV method to determine the relationship

between, economic globalization, urbanization, and

economic growth in developing economies. We

have found that the economic globalization

coefficient remains positive and significant,

implying that a 1% increase in economic

globalization increases environmental pollution by

1.10% in developing economies. While

urbanization has also similar results in LSDV

method as compared to FE and RE, which means

that urbanization increased carbon pollution.

Similarly, industrialization, GDP, and finance

effects also exist in LSDV. The results also show

that the dummy of the year1980 has a negative

effect on carbon pollution, while with the passage

of time, time effect on the environmental pollution

is turn into negative to positive significant in LSDV

model. This also means that magnitude of the time

period is converted from negative to positive

effects, this shows that environmental pollution is

more in the latest era compared to the initial period.

Finally, we have also employed the 2SLS

estimation to improve our results by dealing with

the potential endogeneity problem using the

developing economies dataset. The results are

given in Column 4, the coefficient of economic

globalization is positive and significant at 1 % level

of significance revealing that a 1 % increase in

economic globalization causes carbon emissions to

decrease by 2.6%. While the urbanization impact

on carbon emissions is positive and insignificant

with a magnitude of 0.1%. However, the

remarkable finding is that industrialization has a

positive effect in 2SLS, the magnitude is higher as

compared to other models. This implies that a 1%

increase in industrialization has 0.5% increase in

carbon emissions in developing economies. This

also revealed that industrialization is one of the

main indicators of environmental pollution in

developing economies. However, the result of

variable GDP deviates from the previous models in

2SLS, while financial development has a positive

influence on carbon emissions.

Table 4 shows the result of the full sample of

developing and developed economies using FE,

RE, 2SLS, and LSDV. The results reported in

Column 1 and 2 shows that economic globalization

has a positive effect on environmental pollution at a

statistically significant at 1%. It means that

WSEAS TRANSACTIONS on ENVIRONMENT and DEVELOPMENT

DOI: 10.37394/232015.2022.18.82

Faiz Ur Rahim, Tahira Niaz,

Sania Shaheen, Madiha Asma, Lal K. Almas

E-ISSN: 2224-3496

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economic globalization is not a helping factor in air

quality in the globe. For instance, economic

globalization affects air quality. Similarly, the

effect of urbanization in Column 1 and 2 is

statistically significant. The result also shows that

composite impact is also a positive influence on

carbon emissions. However, industrialization has a

positive and statistically significant impact on

carbon emissions in both columns. The coefficient

of industrialization in Column 1 and 2 shows that a

1% increase in industrialization will cause 0.3%

increase in carbon emissions. Finally, the parameter

estimate on GDP is positive and significant at 1%

percent level implying that economic activity

causes an unfavourable impact on environmental

health.

Overall, similar results have been found in FE and

RE models. This also implies that GDP and

financial

development have also an adverse effect on

environmental pollution. In the Hausman test, FE is

our preferred model.

Column 3 of table 4 shows that economic

globalization and urbanization have a positive

significant influence on carbon emissions

indicating that if economic globalization and

urbanization increase by 1% then carbon emissions

will increase by 0.5% and 2.65%. Composite

effects are also remaining the same in regression.

This finding also infers that the magnitude of

urbanization is more compared to economic

globalization. This result is reliable with facts,

empirics, and theory. Regarding control variables,

we found that industrialization, GDP, and finance

variables have a significant positive influence on

carbon emissions. While table 4 shows empirical

results when 2SLS is used. The coefficient of

economic globalization in Column 3 shows that a

1% rise in economic globalization will lead to a 6%

increase in environmental pollution and this result

is statistically significant. While the urbanization

indicator is insignificant, this implies that

urbanization is not mattered in global pollution.

The coefficients of control variables have expected

sign and become statistically positive significant

indicating that industrialization, GDP, and financial

development will directly affect the carbon

emissions in the globe.

4 Conclusion and Policy Implications

The present study explores the effect of

liberalization and urbanization on environmental

degradation by using FE, RE, LSDV, and 2SLS

models in both developed and developing

economies over the period from 1980 to 2018. The

findings revealed that economic globalization

negatively affected the carbon emissions in

developed economies. Moreover, urbanization has

a positive and significant impact on CO2

emissions.

This means that economic globalization,

urbanization, and the combined effect of twin

indicators has also a positive influence on

environmental pollution in developing economies.

Our results of the full sample are also consistent

with the previous sample of developing and

developed economies.

Based on our empirical evidence, we find that

the outcomes are varied across the developed and

developing sampled countries. Thus, there is

always a need to conduct analysis at country level

in direction to determine the association among

variables at the gross root level for better policy

implication.

Table 4. Urbanization, Liberalization, and Environmental Degradation in Developed and Developing

Economies (Full sample)

WSEAS TRANSACTIONS on ENVIRONMENT and DEVELOPMENT

DOI: 10.37394/232015.2022.18.82

Faiz Ur Rahim, Tahira Niaz,

Sania Shaheen, Madiha Asma, Lal K. Almas

E-ISSN: 2224-3496

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Volume 18, 2022

It is more important to implement a proper plan

of policies for urban improvement and create smart

cities to decrease the urbanization influence on

environmental pollution. Authorities should use

environmental-friendly apparatuses in the urban

areas and provide energy-efficient public transport

for residents. Unplanned urbanization and the

speed of urbanization are one of the key problems

in developing economies. Therefore, developing

nations should build the road map of new

urbanization and should impose environmental

taxes to lessen the effect of urbanization and

industrialization on the environment. Moreover,

authorities build green belts to reduce CO2

emissions, however, better environmental

regulations, political regime, institution quality, and

human capital are also essential to attract clean

urbanization and environmental quality.

Regulations should increase the quality of the

atmosphere of any strategies for urban

transformation. Developing economies should

redesign the industrialization policies in the context

of environmental quality. Authorities can be a

separate an industrial zone from outside the urban

areas. In addition, asymmetric panel data

estimation techniques can be incorporated in the

analysis along with globalization, industrialization,

and urbanization in future research for each

developing and developed countries separately.

Acknowledgement:

Visiting Research Fellow, Sania Shaheen, from

Pakistan has been funded by Higher Education

Commission (HEC), Pakistan through her academic

institution, International Islamic University

Islamabad (IIUI), Pakistan. The partial support

from the Department of Agricultural Sciences, Paul

Engler College of Agriculture and Natural

Sciences, West Texas A and M University is also

acknowledged and sincerely appreciated.

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Faiz Ur Rahim, Tahira Niaz,

Sania Shaheen, Madiha Asma, Lal K. Almas

E-ISSN: 2224-3496

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Volume 18, 2022

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Sania Shaheen, Madiha Asma, Lal K. Almas

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Contribution of Individual Authors to the

Creation of a Scientific Article (Ghostwriting

Policy)

All authors equally contributed to this research

regarding the data collection, empirical analysis,

and writing of the manuscript. Tahira Niaz

conceived the study idea, reviewed the literature,

collected data, and completed the write-up of this

research. Sania Shaheen and Madiha Asma did the

empirical analysis of this study and improved the

study writeup and formatting. Faiz ur Rahim and

Lal K. Almas provided the technical support,

model development, and abstract, and suggested

the policy recommendations.

Sources of Funding for Research Presented in a

Scientific Article or Scientific Article Itself

No funds have been received for this research

Creative Commons Attribution License 4.0

(Attribution 4.0 International, CC BY 4.0)

This article is published under the terms of the

Creative Commons Attribution License 4.0

https://creativecommons.org/licenses/by/4.0/deed.e

n_US

WSEAS TRANSACTIONS on ENVIRONMENT and DEVELOPMENT

DOI: 10.37394/232015.2022.18.82

Faiz Ur Rahim, Tahira Niaz,

Sania Shaheen, Madiha Asma, Lal K. Almas

E-ISSN: 2224-3496

883

Volume 18, 2022