Do Urbanization and Industrialization Deteriorate Environmental Quality? Empirical Evidence from Vietnam

Abstract

Vietnam has transitioned from one of the poorest countries globally into a middle-income nation in three decades since the 1986 Economic Renovation (Doi Moi).However, this economic reform miracle has been widely supported by extensive urbanization and industrialization, leading to severe deterioration in environmental quality. While the effect of economic growth on environmental degradation has been extensively investigated, previous studies on Vietnam have largely ignored the role of urbanization and industrialization, the two key pillars in supporting economic growth in Vietnam. As such, this study focuses on the effect of urbanization and industrialization on environmental quality from 1985 to 2021 using the ARDL estimation. Our overall finding confirms that urbanization in Vietnam leads to further environmental degradation in the short run. However, this negative effect disappears in the long run. However, industrialization deteriorates environmental quality in both the short- and long-run. Our empirical results confirm the validity of the environmental Kuznets curve (EKC) hypothesis in the presence of urbanization and industrialization in the Vietnamese context in the long run, implying that Vietnam’s environmental quality may be improved in the long run when a certain income level is met. These findings imply that the Vietnamese government should reconsider the priority of its industrialization strategy to ensure that sustainable economic growth is not at the expense of environmental quality in the long run.