Environmental regulation, economic growth and air pollution: Panel threshold analysis for OECD countries

Particles with a diameter of <2.5 μm (PM_2.5) have serious adverse-effects on human health, which have caused widespread public concern in recent decades. Currently, most of the existing research on PM_2.5 have used linear regression analysis; very few studies on the subject have been conducted using non-linear models. This study adopts a panel threshold model, which is seldom used in environmental studies, to examine the non-linear effects of environmental regulation and economic growth on PM_2.5 in 30 OECD countries, and we also explore the key driving socio-economic factors for PM_2.5 emissions. The results of our analysis show that, along with an increase in environmental policy stringency, PM_2.5 emissions first rise and then show no significant correlations, and thus a reduction in emissions can be expected if current trends continue. As for GDP per capita, significant and negative correlations are found across the three phases divided by the panel threshold model, indicating a promoting effect for PM_2.5 mitigation. In addition, public expenditure on the air sector correlated positively with PM_2.5 concentrations, expanding the share of service economy reward to reduce air pollution, and urban population ratio exhibits an inverted U-shaped pattern. Future studies may shed more light on the regulation-PM_2.5 nexus, and more studies are needed to confirm the existence of bi-directional correlations between economic development and air pollution.