The Technical and Scale Effects of Economic Growth on the Environment in Iranian Provinces; Panel VAR Approach

The effects of economic growth on the environment is one of the most important factors in current discussions in environmental economics. Industrialization of societies leads to further exploitation of fossil fuels such as coal, oil and gas. The combustion of these fuels leads to increased emission of toxic and dangerous gases and damages such as global warming and climate change. Therefore, in this study we use the VAR panel method to calculate the technical, scale and combination effects of economic growth on the environment of Iranian provinces for the 2005 to 2016 period. The results show that shocks to per capita income (a measure of technical effects) reduced environmental pollution (CO2 emissions). However, shocks to GDP2 (a measure of scale effects) and capital-labor ratio (a measure of combined effects) increased environmental pollution. Analysis of variance also showed that in Iran, per capita income has greater impact on environmental quality and pollution than other measures of economic growth.