The role of natural resources in economic growth: new evidence from Pakistan.
| Autor | Shabbir, Aiza |
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Introduction
According to Barbier (2003), most of the economists recognize that by including physical capital, natural and environmental resources should also be observed because these are also the most important economic assets. There are three debates covered from different dimensions which have arisen recently related to the role of natural resources in economic growth or economic development. Firstly, does the environment play a vital role in sustainable development and human welfare? If the concept is true, then is there any specific "compensation rules" essential to ensure that the future welfare of the society is not deteriorated by natural resources reduction today? Secondly, the environmental Kuznets curve (EKC) theory has promoted the empirical finding of an "inverted U"-shaped relationship between environmental pollution indicators. Does the existence of such type of relationship of EKC advocate that environmental degradation will ultimately reduce with growth? Finally, modern economic theories questioned based on empirical findings whether low-income economies, which are endowed with natural resources, develop quickly as compared to the economies that are poor in sense of natural resources? The most important question filtered from all dimensions of the debate is how natural resources play a role in the economic growth of the economy?
Water is a huge natural resource and it can be regarded as the essential ingredient and the source of life on earth. Life is tied to water as it is attached to air and food. Until the past few decades, the resources of freshwater were considered to be more than satisfactory for human needs; however, with the growing rate of population, freshwater has become scarce at an accelerated rate. Access to water has always been considered essential to socio-economic development, sound environment, the strength of societies and civilizations and the survival of human race itself. In less-developed nations, a huge number of individuals, most of them ladies, walk miles every day to discover the water they need and convey it back home. However, water availability has not got the consideration it deserves in a worldwide discussion of the feasible usage of natural resources. It has been analysed even less with regards to population growth.
Water resources are a vital element for production around the world. Many nations face water accessibility issues in addition to dry spells and ground-water depletion. Besides, water in dry zones is scarce to the point that it is no more conceivable to take care of the demand without surpassing economical amount and quality use rates. As demands from all divisions are required to keep growing, the conflicts over water usage will worsen soon. The world, in general, is currently facing the threat of water shortage. The growing demand driven by population growth and economic development creates strong competition for water between different areas. Nowadays, media raises their voice to aware people about water shortage that we can face in the coming decades. It is predicted that 66% of the total population would be living in water-stressed areas by 2025 (UNESCO, 2013). Water is renewable only if well managed. Water resources should be managed efficiently and on equitable basis, otherwise it can raise a serious challenge to achieve sustainable growth.
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Literature review
Water is fundamental for human life, food, environment and economic growth. Absence of access to water adversely influences socio-economic stability. Environmental change because of the greenhouse impact has flourished as one of the most important environmental problems for the 21st century. Emissions resulting out of the human activities are increasing the atmospheric concentrations of dangerous gases resulting in an extra warning on the earth surface. Water scarcity is achieving alarming dimensions considering the extremely rapid population growth. Water would not be effectively accessible to support the new generation and socioeconomic development. The shortage of water results in a significant reduction in the growth of the economy. Economic activities include production and consumption processes that cannot remain unravelled beyond their environment. Therefore, the impact on the surroundings increases with economic development. However, the contradiction into the procedure of economic growth vs its fixed consequences on non-renewable resources make the relationship a sophisticated one.
Panayotou (1997) examined the EKC by using the principle factors such as sulphur dioxide, population density, policy variable, annual growth rate and GDP. The example included 30 developed and developing nations for the period 1982-1994. On account of the surrounding SO2 levels, he found that the nature of the policies and organizations could altogether decrease ecological corruption at low pay levels and accelerate change at higher wage levels. He found developing proof that ecological corruption limits conceivable development outcomes. He predicted that out of 8 billion individuals, 5 billion individuals will endure the water worry in 2025. He proposed that better arrangements, for instance, secure property rights, a better requirement of agreements and successful ecological directions, could straighten the natural Kuznets bend and lessen the natural cost of monetary development.
Akram (2012) studied the impact on the environment because of the economic development in selected Asian countries for the years 1972-2009. The results showed that the growth of the economy was contrarily influenced by the means of changes in temperature, perception and the growth of population, while urbanization and human advancement invigorated the growth of the economy. Agriculture was the almost powerless part to contribute to the environmental change while assembling was the slightest influenced division. The findings also showed that the economic growth was contrarily influenced by the means of changes in the temperature, precipitation and growth of population, while urbanization and human improvement empowered the economic growth.
Choumert et al. (2013) studied the variance of EKC and the relationship between economic growth and deforestation. The work used parameters such as econometric methodology, the measure of deforestation, geographical region and presence of control factors for investigating EKC. A defining moment was identified after 2001 and it was established that EKC would not blur until a hypothetical option was given.
The study analysed the association between them for 11 countries [1] over the period 1981-2009, using panel unit roots, co-integration in heterogeneous panels and panel causality test. They checked up that there was some positive long-run relationship among the emissions of CO2, electric power and energy use in GDP. There was a bi-directional causality between the emissions of carbon dioxide and the usage of electric power. This study also analysed the greenhouse gases emissions and used ordinary least squares and dynamic ordinary least squares to evaluate the relevant coefficients.
The hypothesis of structural change and EKC was analysed by Marsiglio et al. (2016). The study constructed a standard balanced growth path for the flow of wages, structural changes and pollution. A modified U-shaped income-pollution association occurred as a reaction to the structural changes. It was shown that the negative relationship between income and pollution was a temporary occurrence, while in the long run, pollution would increment with the expansion in income.
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Methodology
3.1 Data collection
In this study, just the case of Pakistan was considered to find out the relationship between water, economic growth and the environmental change.
Total five variables are used in this study, i.e. GDP, population density, water renewable resources, deforestation and the emissions of CO2, based on time-series data from 1972 to 2016. The annual data is collected from World Development Indicators, Food and Agriculture Organization and Pakistan Economic Survey. To make results linear and all variables of the magnitude order, transformation of all variables to logarithm has been done.
Sample size plays an imperative part in getting solid outcomes; the point behind the determination of ideal example size is to guarantee a satisfactory force of measurable hugeness of discoveries in relationship (Nucu, 2011). For getting critical outcomes, as a general guideline, 80% example size is required (Agalega and Antwi, 2013).
This study uses the time series data from 1972 to 2016 and the information set covers 45 observations. If the sample size is large, then there is less chance of spurious results. This period is picked because of its remarkableness to Pakistan's Economic Recovery...
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