Shock effect of COVID-19 infection on environmental quality and economic development in China: causal linkages (Health Economic Evaluation)

Since coronavirus disease 2019 (COVID-19) was first reported on December 2019 in Wuhan, it fast spread to the rest of China, which has turned into a global public health problem later and generated global stock markets to violently shake. We inspect the causal relationships between economic development (ED) and environmental quality (EQ) during the period from January 2019 to May 2020 with the structural break for China and investigate the causal linkages between ED and EQ in subgroup of before and after the outbreak of COVID-19 with a semi-parametric model. The empirical tests show that smoothing structural transforms matter for the linkages of causality between ED and EQ, especially after COVID-19 infection. While the Toda–Yamamoto causality analysis supports unidirectional causality between ED and EQ before the outbreak of COVID-19, under structural shifts by the causality supplies of bidirectional casual linkages after the outbreak of COVID-19. Our results further clarified the proof that the economic activity gives rise to the environmental pollution and energy utilization mainly via the shock of COVID-19 in China. The emphasis on nonlinear causality between economic development and environmental quality may be an opportunity for China’s economic recovery under considering the factor of COVID-19 infection.