Results of Cross-Country Comparison

What causes some countries to perform better economically and environmentally than the other countries is an issue to be studied. Without/with considering CO2 emissions, a cross-country comparison is made for further exploration. The ten Asian economies are studied into groups. The NIEs and the ASEAN-4 are grouped for the countries’ geographical and economical proximity. China and Japan are singled out individually. In other words, the following analysis is made based on China, Japan, the NIEs and the ASEAN-4

respectively. The industrialized APEC countries, including Australia, Canada, New Zealand and the USA, are incorporated as a comparison basis to Asian economies.

Figure 3.3 shows the cumulative changes in productivity and its components for China.

Without/with CO2 emissions, the productivity growths (MALM) show similar patterns:

increases from 1987 to 1990, decline from 1990 to 1993, and increase again after 1993.

However, the changes of the MALM with CO2 emissions are more undesirable, i.e., the increase is slower and decrease faster than which only considered the GDP after 1990.

Considering CO2 emissions, it was observed that the two components of MALM, EFFCH and TECHCH, fluctuate erratically. While the EFFCH rises from 1987 to 1988, it decreases from 1988 to 1994 then reverses from 1994 to 1996, the TECHCH moves almost to the same extent but in a reverse direction. The TECHCH with CO2 emissions is always less than that without CO2 emissions, indicating that technical change may be overestimated when considering only economic aspects. The EFFCH shows little different between the two plots.

No matter whether the environment is taken account or not, the result suggests that China experiences either technical regress or efficiency loss, and hence deterioration in productivity during our sample period. In other words, lacking of catching-up and innovation capacities in turns encumbers the productivity growth for China. Furthermore, there exists an overestimation for China’s technical change when environmental factors are considered.

As for Japan (see Figure 3.4) the MALM index increases rapidly from 1987 to 1991 and extends steadily from 1991 to 1996 without/with CO2 emissions. Before 1991, both EFFCH and TECHCH contribute to the growth of productivity. After 1991, the advance in technical change dominates the stability of efficient change leading to positive growth in productivity.

It is worth noticing that the cumulative MALM with CO2 emissions is even higher than that without CO2 emissions in every year. The difference after considering emissions comes from the better cumulative EFFCH growth indicating Japan’s better capacity for allocating its

input resources compared with other economies. In other words, Japan performs rather well in catching-up to the frontier due to fewer emissions.

The MALM index of the NIEs (see Figure 3.5) increases by about 40 percent over the years from 1987 to 1996 without/with CO2 emissions, indicating a rapid productivity growth, especially after 1992. Before 1992, the MALM is dominated by the TECHCH, indicating that the productivity growth is mainly due to improvements in technology. After 1992, the rapid growth of MALM is due to the steady increase of TECHCH and the speedy increase of EFFCH. This implies that the average efficiency of the NIEs countries catches up with the world frontier after 1992. Like Japan, the cumulative MALM with CO2 emissions is even higher than that without CO2 emissions in every year after 1990. The difference after considering emissions also comes from the higher cumulative EFFCH growth. In general, after considering environmental factors, the general productivity growth of the NIEs performs even better due to the efficiency progress.

The cumulative changes in productivity and its components for ASEAN-4 are shown in Figure 3.6. Without CO2 emissions, the productivity of ASEAN-4 countries decreases from 1987 to 1990, and remains rather inactive afterwards. The productivity trend with CO2

emissions shows a similar tendency but in a less active manner, implying an overestimation of the ASEAN-4’s productivity when neglecting the environmental impact. The TECHCH fluctuates less with CO2 emissions than without, and so does the EFFCH. When taking environment variable into account, the MALM is affected by the deterioration of both EFFCH and TECHCH throughout the sample period, indicating the lack of catching-up as well as innovation affects the growth of productivity.

Incorporating the industrialized APEC countries (see Figure 3.7), without/with taking account CO2 emissions, the patterns of MALM and its components show almost no difference.

It could be concluded that the industrialized APEC countries are relatively more economic-environmental balanced than Asian economies. In summary, Japan and the NIEs

perform even better after considering CO2 emissions because of their higher productivity growth during the time of our sample period. Emissions can be dealt as undesirable outputs that imply inefficiency. From the experience of Japan and the NIEs, the better productivity growth is because of greater EFFCH defined as their ability to well allocate resources with fewer emissions. On the other hand, the productivity of China and the ASEAN-4 are overestimated when only focusing on GDP from our results. Taking environment into consideration, the productivity growth gets worse because of the fluctuating EFFCH or TECHCH in turns in China. As for the ASEAN-4, the productivity deteriorates due to inactive EFFCH and TECHCH. The Environmental Kuznets Curve hypothesis is mirrored in our cross-country comparison for the productivities of those economies with higher GDP per capita. They perform better both economically and environmentally. Furthermore, the conclusions of this section can serve as encouragement to forge a greater link between the economy and environment.

0.7 0.8 0.9 1.0 1.1 1.2 1.3 1.4 1.5

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 year

index

MALM EFFCH TECHCH 0.7

0.8 0.9 1.0 1.1 1.2 1.3 1.4 1.5

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 year

index

MALM EFFCH TECHCH

With CO2

Without CO2

Figure 3.3 Cumulative Change in e MALM and Its Component for China th

0.7 0.8 0.9 1.0 1.1 1.2 1.3 1.4 1.5

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 year

index

MALM EFFCH TECHCH

0.7 0.8 0.9 1.0 1.1 1.2 1.3 1.4 1.5

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 year

index

MALM EFFCH TECHCH With CO2

Without CO2

Figure 3.4 Cumulative Change in the MALM and Its Component for Japan

0.7 0.8 0.9 1.0 1.1 1.2 1.3 1.4 1.5

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 year

index

MALM EFFCH TECHCH 0.7

0.8 0.9 1.0 1.1 1.2 1.3 1.4 1.5

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 year

index

MALM EFFCH TECHCH

Without CO2 With CO2

Figure 3.5 Cumulative Change in the MALM and Its Component for NIEs

0.7 0.8 0.9 1.0 1.1 1.2 1.3 1.4 1.5

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 year

index

MALM EFFCH TECHCH

0.7 0.8 0.9 1.0 1.1 1.2 1.3 1.4 1.5

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 year

index

MALM EFFCH TECHCH Without CO2 With CO2

Figure 3.6 Cumulative Change in the MALM and Its Component for ASEAN-4

0.7 0.8 0.9 1.0 1.1 1.2 1.3 1.4 1.5

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 year

index

MALM EFFCH TECHCH

0.7 0.8 0.9 1.0 1.1 1.2 1.3 1.4 1.5

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 year

index

MALM EFFCH TECHCH Without CO2 With CO2

Figure 3.7 Cumulative Change in the MALM and Its Component for Industrialized APEC Countries