Causality Analysis between Poverty and Environment: A Case Study of Pakistan’s Coastal Belt

Abstract

The current study explores the impact of poverty on
environmental degradation and impact of environment on
poverty in the Coastal Belt of Pakistan. Poverty is measured
by using headcount ratio measure. While environmental
proxies used in this study are fossil fuel energy consumption
from fossil fuel (FFEC), combustible waste and renewable
(CRW), and carbon dioxide emission from the use of liquid
fuel (CELF). The study indicates a strong long-run
correlation between poverty and environmental degradation.
This relationship has been investigated by using Augmented
Dicky-Fuller, co-integration as well as Granger causality
tests. Pakistan’s secondary data from 1971 to 2018 on
poverty and environmental variables have been used for
analysis purposes. The results of the study indicate that
poverty contributes to environmental degradation and results
in lowering the pace of economic growth and development.
Moreover, environmental degradation also is a cause of
poverty and may affect economic development adversely. The
present study predicts the evidence of a bi-directional
relationship between environmental factors and poverty in
Pakistan