An Empirical Time Series Model of Economic Growth and Environment

In this paper, I use the Solow (1956) model to examine the impact of water pollution on per worker output. I use data from New Zealand. I use an autoregressive distributed lag model that accounts for endogeneity. I also employ the Granger causality tests to examine the direction of causality between water pollution and per worker output. The findings indicates that water pollution affects the level of output per worker. This implies that a tightened pollution policy may have short-run impacts rather than the long-run.