Effect of CO2 Emissions, Human Capital, Foreign Direct Investment, and Trade Openness on Economic Growth in Pakistan

Javeed Iqbal; Dr Moazam  Shahwar; Shazia Khalid; Muhammad Tariq; Shazia Parveen

Javeed Iqbal Universiti Utara Malaysia
Dr Moazam Shahwar
Shazia Khalid Ghazi University Dera Ghazi Khan
Muhammad Tariq Bahauddin Zakariya University Multan
Shazia Parveen Ghazi University Dera Ghazi Khan

Keywords: ARDL, CO2 emissions, economic growth, environmental degradation, foreign direct investment, human capital, Pakistan

Abstract

Abstract Views: 0

Human capital and environmental degradation are critical factors influencing economic growth. This study analyses the relationship between these factors, foreign direct investment, and trade openness in shaping Pakistan's economic trajectory from 1990 to 2020. The findings of ARDL model and ADF test demonstrate that trade openness, foreign direct investment, and human capital positively impact economic growth. However, the interplay of CO2 emissions with human capital negatively impacts growth. The findings underscore the dual function of human capital in enhancing economic success and environmental standards. Policymakers must mitigate the adverse externalities of environmental degradation to optimize the advantages of human capital and foster sustainable economic development.

Downloads

Download data is not yet available.

References

Afridi, A. H. (2016). Human capital and economic growth of Pakistan. Business & Economic Review, 8(1), 77–86.

Aghaei, M., Rezagholizadeh, M., & Bagheri, F. (2023). The effect of human capital on economic growth: The case of Iranâs provinces. Quarterly Journal of Research and Planning in Higher Education, 19(1), 21–44.

Agiomirgianakis, G., Asteriou, D., & Monastiriotis, V. (2002). Human capital and economic growth revisited: A dynamic panel data study. International Advances in Economic Research, 8(3), 177–187. https://doi.org/10.1007/BF02297955

Alam, S., Fatima, A., & Butt, M. S. (2007). Sustainable development in Pakistan in the context of energy consumption demand and environmental degradation. Journal of Asian Economics, 18(5), 825–837. https://doi.org/10.1016/j.asieco.2007.07.005

Alatas, S., & Cakir, M. (2016). The effect of human capital on economic growth: A panel data analysis. Journal of Management Sciences, 14(27), 539–555.

Ali, H. S., Law, S. H., Yusop, Z., & Chin, L. (2017). Dynamic implication of biomass energy consumption on economic growth in Sub-Saharan Africa: Evidence from panel data analysis. GeoJournal, 82, 493–502. https://doi.org/10.1007/s10708-016-9698-y

Ali, L. (2020). Human capital, equipment investment and the economic growth of Pakistan. International Journal of Business and Management Sciences, 1(2), 78–88.

Ali, R., Bakhsh, K., & Yasin, M. A. (2019). Impact of urbanization on CO2 emissions in emerging economy: Evidence from Pakistan. Sustainable Cities and Society, 48, Article e101553. https://doi.org/10.1016/j.scs.2019.101553

Ali, S., Chaudhry, I. S., & Farooq, F. (2012). Human capital formation and economic growth in Pakistan. Pakistan Journal of Social Sciences, 32(1), 229–240.

Amir, M., Mehmood, B., & Shahid, M. (2012). Impact of human capital on economic growth with emphasis on intermediary role of technology: Time series evidence from Pakistan. African Journal of Business Management, 6(1), 280–285. http://doi.org/10.5897/AJBM11.2104

Arabi, K. A. M., & Abdalla, S. Z. S. (2013). The impact of human capital on economic growth: Empirical evidence from Sudan. Research in World Economy, 4(2), 43–53. http://dx.doi.org/10.5430/rwe.v4n2p43

Asghar, N., Awan, A., & Rehman, H. U. (2012). Human capital and economic growth in Pakistan: A cointegration and causality analysis. International Journal of Economics and Finance, 4(4), 135–147.

Bano, S., Zhao, Y., Ahmad, A., Wang, S., & Liu, Y. (2018). Identifying the impacts of human capital on carbon emissions in Pakistan. Journal of Cleaner Production, 183, 1082–1092. https://doi.org/10.1016/j.jclepro.2018.02.008

Bawono, S. (2021). Human capital, technology, and economic growth: A case study of Indonesia. Journal of Asian Finance, Economics and Business, 8(5), 29–35.

Borojo, D. G., & Yushi, J. (2015). The impact of human capital on economic growth in Ethiopia. Journal of Economics and Sustainable Development, 6(16), 109–118.

Brown, P. (2003). The opportunity trap: Education and employment in a global economy. European Educational Research Journal, 2(1), 141–179. https://doi.org/10.2304/eerj.2003.2.1.4

Cleeve, E. A., Debrah, Y., & Yiheyis, Z. (2015). Human capital and FDI inflow: An assessment of the African case. World Development, 74, 1–14. https://doi.org/10.1016/j.worlddev.2015.04.003

Cooray, A., Dutta, N., & Mallick, S. (2016). Does female human capital formation matter for the income effect of remittances? Evidence from developing countries. Oxford Development Studies, 44(4), 458–478. https://doi.org/10.1080/13600818.2016.1194970

De Oliveira, M. M., Santos, M. C., & Kiker, B. F. (2000). The role of human capital and technological change in overeducation. Economics of Education Review, 19(2), 199–206. https://doi.org/10.1016/S0272-7757(99)00020-5

Dinh, T. T. H., Vo, D. H., Vo, A. T., & Nguyen, T. C. (2019). Foreign direct investment and economic growth in the short run and long run: Empirical evidence from developing countries. Journal of Risk and Financial Management, 12(4), Article e176. https://doi.org/10.3390/jrfm12040176

Faridi, M. Z., Chaudhry, M. O., & Azam, A. (2018). Do economic development, urbanization and poverty matter for environmental degradation? Evidence from Pakistan. Pakistan Journal of Social Sciences, 38(1), 262–287.

Fetahi-Vehapi, M., Sadiku, L., & Petkovski, M. (2015). Empirical analysis of the effects of trade openness on economic growth: An evidence for South East European countries. Procedia Economics and Finance, 19, 17–26. https://doi.org/10.1016/S2212-5671(15)00004-0

Galor, O. (2005). From stagnation to growth: Unified growth theory. In P. Aghion & S. Durlauf (Eds.), Handbook of economic growth (pp. 171–293). Newness

Gheraia, Z., Benmeriem, M., Abdelli, H. A., & Saadaoui, S. (2021). The effect of education expenditure on economic growth: The case of the Kingdom of Saudi Arabia. Humanities and Social Sciences Letters, 9(1), 14–23. https://doi.org/10.18488/journal.73.2021.91.14.23

Hafeez, M., Chunhui, Y., Strohmaier, D., Ahmed, M., & Jie, L. (2018). Does finance affect environmental degradation: Evidence from one belt and one road initiative region? Environmental Science and Pollution Research, 25, 9579–9592. https://doi.org/10.1007/s11356-018-1317-7

Hao, L. N., Umar, M., Khan, Z., & Ali, W. (2021). Green growth and low carbon emission in G7 countries: How critical the network of environmental taxes, renewable energy and human capital is? Science of the Total Environment, 752, Article e141853. https://doi.org/10.1016/j.scitotenv.2020.141853

Herzer, D., & Klasen, S. (2008). In search of FDI-led growth in developing countries: The way forward. Economic Modelling, 25(5), 793–810.

Intisar, A. R., Yaseen, M. R., Kousar, R., Usman, M., & Makhdum, M. S. A. (2020). Impact of trade openness and human capital on economic growth: A comparative investigation of Asian countries. Sustainability, 12(7), Article e2930. https://doi.org/10.3390/su12072930

Jonathan, K., Grubb, M., Popp, D., & Edenhofer, O. (2006). The transition to endogenous technical change in climate-economy models: A technical overview to the innovation modeling comparison project. The Energy Journal, 27(1), 17–56.

Khan, R., & Chaudhry, I. S. (2019). Impact of human capital on employment and economic growth in developing countries. Review of Economics and Development Studies, 5(3), 487–496. https://doi.org/10.26710/reads.v5i3.701

Khilji, B. A. (2005). Education as a factor of human capital formation in Pakistan (1951-1998). Journal of Agriculture and Social Sciences, 1(4), 370–373.

Lekhi, R. K. (2005). The economics of development and planning. Kalyani Publishers.

Mabrouki, M. (2023). Patent, education, human capital, and economic growth in Scandinavian countries: A dynamic panel CS-ARDL analysis. Journal of the Knowledge Economy, 14(3), 3028–3043. https://doi.org/10.1007/s13132-022-01001-1

Mahmood, M. T. (2012). Does human capital expedite economic development? The case of Pakistan. Journal of Economics and Behavioral Studies, 4(3), 163–171. https://doi.org/10.22610/jebs.v4i3.313

Mengesha, Z. D., & Singh, L. (2023). Human capital accumulation and economic growth of Ethiopian economy. African Journal of Science, Technology, Innovation and Development, 15(2), 211–226.

Nasreen, S., & Anwar, S. (2014). Causal relationship between trade openness, economic growth and energy consumption: A panel data analysis of Asian countries. Energy Policy, 69, 82–91. https://doi.org/10.1016/j.enpol.2014.02.009

Pegkas, P. (2015). The impact of FDI on economic growth in Eurozone countries. The Journal of Economic Asymmetries, 12(2), 124–132. https://doi.org/10.1016/j.jeca.2015.05.001

Pesaran, M. H., & Shin, Y. (1995). An autoregressive distributed lag modeling approach to cointegration analysis. Cambridge University Press.

Rahim, S., Murshed, M., Umarbeyli, S., Kirikkaleli, D., Ahmad, M., Tufail, M., & Wahab, S. (2021). Do natural resources abundance and human capital development promote economic growth? A study on the resource curse hypothesis in next eleven countries. Resources, Environment and Sustainability, 4, Article e100018. https://doi.org/10.1016/j.resenv.2021.100018

Rehman, I. U., Mahdzan, N. S. A., Trifu, A., & Bilal, M. (2014). A cointegration approach to modeling human capital formation, self-employment, and economic growth: Evidence from Pakistan. Quality & Quantity, 48, 1439–1453. https://doi.org/10.1007/s11135-013-9845-1

Robeyns, I. (2006). Three models of education: Rights, capabilities and human capital. Theory and Research in Education, 4(1), 69–84. https://doi.org/10.1177/1477878506060683

Shah, S. Z. A., Asghar, M. M., & Riaz, U. (2020). Exploring the factors affecting economic growth in Pakistan. Global Social Sciences Review, 5(3), 400–409. http://dx.doi.org/10.31703/gssr.2020(V-III).43

Shahzad, F. (2015). Role of human capital on economic growth: A case study of Pakistan. International Journal of Accounting and Economics Studies, 3(1), 20–24. https://doi.org/10.14419/rwjt2n26

Shutt, J., & Sutherland, J. (2003). Encouraging the transition into self-employment. Regional Studies, 37(1), 97–103. https://doi.org/10.1080/0034340022000033427

Solow, R. M. (1956). A contribution to the theory of economic growth. The Quarterly Journal of Economics, 70(1), 65–94. https://doi.org/10.2307/1884513

Todaro, M. P., & Smith, S. C. (2012). Economic development (11th ed). Prentice Hall.

Uddin, M. A., Ali, M. H., & Masih, M. (2021). Institutions, human capital and economic growth in developing countries. Studies in Economics and Finance, 38(2), 361–383. https://doi.org/10.1108/SEF-10-2019-0407

Wang, Z., Bui, Q., Zhang, B., & Pham, T. L. H. (2020). Biomass energy production and its impacts on the ecological footprint: An investigation of the G7 countries. Science of the Total Environment, 743, Article e140741. https://doi.org/10.1016/j.scitotenv.2020.140741