The Economic Growth & Environmental Degradation Nexus in Algeria Using the Fuzzy Logic

Abstract

This study explores and analyzes the relationship between the economic growth and the environmental degradation in an oil exporting economy i.e. Algeria; through two methodological approaches. Firstly, the study analyzes the economic and the environmental situation in Algeria using the economic and environmental indicators. Second, it employs several estimation methods; the ordinary least square estimation method (OLS), Tanaka (1982) fuzzy regression method and the Fuzzy least square regression (FLSR) estimation method, in order to test the validity of EKC hypothesis in Algeria for air pollution during the period 1970-2013. All the estimated models have the correct signs, which are consistent with the EKC hypothesis. This suggested an inverted U-shaped relationship between economic growth and environmental degradation. The negative sign of squared term of income seems to validate the break of CO2pc emissions and real GDPpc at the higher levels of income. Through the conducted comparison between the used estimating methods, it has been realized that the Tanaka method is superior to other estimation methods in the sense of reducing the errors. The findings of this study recommends that, in the case of Algeria, ensuring a high economic growth rate should be the main priority of the government along with environmental policies to ensure the welfare of the Algerian society.