Industrial water use, income, trade, and employment: environmental Kuznets curve evidence from 17 Taiwanese manufacturing industries

Abstract

This paper investigated the relationships between industrial water use, income, trade, and employment for 17 Taiwanese industries from 1998 to 2015. We explored cross-sectional dependent unit root, panel cointegration, and causality tests to estimate their long-term relationships and causal nexus. There existed long-term equilibrium relationships among the variables. The long-term elasticity estimates of industrial water use with respect to income, squared income, trade, and employment are 4.27, − 0.15, 0.22, and 0.92, respectively. The results do not confirm an inverted U-shaped environmental Kuznets curve. A unidirectional causal relationship is found between water use and income, and a bidirectional causal relationship is identified between water use and employment. Exports cause industrial water use. As expected, both employment and exports lead to income. Hence, policy makers should promote investment into water efficiency and water recycling. Various governments reward firms for water efficiency and lower consumption without negative long-term effects on economic growth.