Investigating the Factors Affecting Natural Disinvestment: A Panel Data Regression Approach

Abstract

This study examined the correlation between economic growth and the impact on the environment, specifically focusing on the concept of environmental sustainability. The World Bank's Adjusted Net Savings (ANS) data is utilized in this study to gauge the strain on the environment, specifically through the measurement of natural disinvestment. This measurement encompasses the cumulative effects of carbon dioxide (CO2) damage, as well as depletions in minerals, energy, and forest resources. This study uses panel data with respect to the endogeneity of explanatory variables to estimate the real effect of per capita income and the other variables on environmental pressure. In this regard, employing the panel Fixed-Effects Instrumental Variable (IV) methodology, the data from 213 countries have been used in the period from 1990 to 2018. Through regression analysis, it has been discovered that there is a direct correlation between income and the impact on the environment in developing nations. However, this relationship is notably more pronounced in low-income countries compared to high-income countries. Additionally, the study reveals that trade expansion contributes to an increase in environmental pressure across all groups of countries. An increase in the school enrolment rate can affect the environment in developed and high-income developing countries. Moreover, the variable effect of capital openness on environmental pressure was estimated to be positive for developed and high-income countries. However, this effect was found to be negative for low-income countries. Finally, the result showed that developing countries should improve their legal structure and also reduce the bureaucracy and complexity of the laws.

Keywords

• developing country
• economic growth
• environmental sustainability
• instrumental variables
• panel data