Economic Growth and Environmental Sustainability in Low and Middle-Income Countries by Using System Generalized Method of Moments

Abstract

This study estimated the relationship between environmental sustainability and economic growth in low and middle-income economic countries. The study used robust and strongly balanced panel data from 2008 to 2021. The advanced econometric approach two different variants of the System Generalized Method of Moments (one-step-SGMM and two-step-SGMM) were used for empirical analysis. The analysis shows a significant association between environmental sustainability and economic growth in projected economies. Logistic infrastructure, gross capital formation, labor force participation rate, and carbon dioxide emission are independent variables and significantly affect our dependent variable, GDP per capita. The finding of the one-step SGMM showed that the logistic performance index and CO2 emission are statistically significant for economic growth in particular countries. Thus, gross capital formation is also statistically significant and positively affects our economic growth of the economies. Similarly, the labor participation rate has a positive and significant impact on the economic growth of low-income countries. Besides, in two-step SGMM, all independent variables, Logistic infrastructure, gross capital formation, labor force participation rate, and carbon dioxide emission, significantly affect our dependent variable economic growth. The results of the autocorrelation tests indicate potential serial correlation in the models' errors. The findings of this study suggested that policymakers must adopt complete approaches that arrange sustainable development goals, mitigate environmental degradation, and promote inclusive economic growth to ensure a prosperous and resilient future for all.