Investigating Corruption, Income Inequality, and Environmental Degradation in Pakistan: A Time Series Analysis

Ullah, Asad and Ali, Amjad (2024): Investigating Corruption, Income Inequality, and Environmental Degradation in Pakistan: A Time Series Analysis.

Abstract

The aim of this study is to investigate the intricate relationship between corruption, income inequality, and environmental degradation in Pakistan using time series data spanning from 1980 to 2022. Employing a rigorous empirical approach, we utilize a combination of statistical tests, including the Augmented Dickey Fuller and Dickey Fuller Generalized Least Square unit root tests, alongside the autoregressive distributed lag approach to cointegration and an error correction model. Our empirical analysis yields several key findings that shed light on the complex dynamics at play. Firstly, we confirm the presence of an Environmental Kuznets Curve (EKC) in the context of Pakistan, suggesting that environmental degradation initially worsens with economic development before reaching a turning point and subsequently improving. Moreover, our results reveal intriguing insights into the interplay between corruption, income inequality, and environmental degradation. Specifically, we find that in the absence of corruption, income inequality exhibits a negative correlation with environmental degradation, implying that a more equitable distribution of income may mitigate environmental pressures. However, this relationship is reversed in the presence of corruption, where the combined effect of corruption and income inequality exerts a positive impact on environmental degradation in the long run. These findings underscore the multifaceted nature of the relationship between socio-economic factors and environmental outcomes, highlighting the importance of considering contextual factors such as corruption in understanding environmental degradation dynamics. Furthermore, our results have significant implications for policymakers and stakeholders tasked with formulating strategies to address environmental challenges in Pakistan. By recognizing the intertwined nature of corruption, income inequality, and environmental degradation, policymakers can develop more targeted and effective interventions aimed at promoting sustainable development and fostering environmental stewardship. From enhancing anti-corruption measures to implementing policies that promote income equality and environmental sustainability, there exists a range of avenues through which Pakistan can navigate towards a more sustainable and equitable future. This study contributes to the growing body of literature on the nexus between corruption, income inequality, and environmental degradation, providing valuable insights for policymakers, researchers, and practitioners alike. By elucidating the underlying dynamics and implications of these relationships, we aim to inform evidence-based policy interventions that promote sustainable development and environmental conservation in Pakistan and beyond.

• Item Type: MPRA Paper
• Language: English
• Keywords: Corruption, Income Inequality, Environmental Degradation, Sustainable Development
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O13 - Agriculture ; Natural Resources ; Energy ; Environment ; Other Primary Products; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O15 - Human Resources ; Human Development ; Income Distribution ; Migration; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q56 - Environment and Development ; Environment and Trade ; Sustainability ; Environmental Accounts and Accounting ; Environmental Equity ; Population Growth

References

Ahmad, M., Peng, T., Awan, A., & Ahmed, Z. (2023). Policy framework considering resource curse, renewable energy transition, and institutional issues: Fostering sustainable development and sustainable natural resource consumption practices. Resources Policy, 86, 104173.

Akbostanci, E. Türüt-AsIk, S. and Ipek, T. G. (2009). The relationship between income and environment in Turkey: Is there an environmental Kuznets curve? Energy Policy, 37(6), 861-867.

Ali, A. (2015). The impact of macroeconomic instability on social progress: an empirical analysis of Pakistan. (Doctoral dissertation, National College of Business Administration & Economics Lahore).

Ali, A. (2018). Issue of Income Inequality Under the Perceptive of Macroeconomic Instability: An Empirical Analysis of Pakistan. Pakistan Economic and Social Review, 56(1), 121-155.

Ali, A. and Bibi, C. (2017). Determinants of Social Progress and its Scenarios under the role of Macroeconomic Instability: Empirics from Pakistan. Pakistan Economic and Social Review 55 (2), 505-540.

Ali, A., & Audi, M. (2016). The Impact of Income Inequality, Environmental Degradation and Globalization on Life Expectancy in Pakistan: An Empirical Analysis. International Journal of Economics and Empirical Research, 4 (4), 182-193.

Ali, A., & Audi, M. (2018). Macroeconomic Environment and Taxes Revenues in Pakistan: An Application of ARDL Approach. Bulletin of Business and Economics (BBE), 7(1), 30-39.

Ali, A., & Rehman, H. U. (2015). Macroeconomic instability and its impact on the gross domestic product: an empirical analysis of Pakistan. Pakistan Economic and Social Review, 285-316.

Ali, A., & Şenturk, I. (2019). Justifying the Impact of Economic Deprivation, Maternal Status and Health infrastructure on Under-Five Child Mortality in Pakistan: An Empirical Analysis. Bulletin of Business and Economics, 8(3), 140-154.

Ali, A., Audi, M., & Roussel, Y. (2021). Natural Resources Depletion, Renewable Energy Consumption and Environmental Degradation: A Comparative Analysis of Developed and Developing World. International Journal of Energy Economics and Policy, 11(3), 251-260.

Ali, A., Audi, M., Bibi, C., & Roussel, Y. (2021). The Impact of Gender Inequality and Environmental Degradation on Human Well-being in the Case of Pakistan: A Time Series Analysis. International Journal of Economics and Financial Issues, 11(2), 92-99.

Ali, A., Audi, M., Senturk, I., & Roussel, Y. (2022). Do Sectoral Growth Promote CO2 Emissions in Pakistan? Time Series Analysis in Presence of Structural Break. International Journal of Energy Economics and Policy, 12(2), 410-425.

Ashiq, S., Ali, A., & Siddique, H. M. A. (2023). Impact of Innovation on CO2 Emissions in South Asian Countries. Bulletin of Business and Economics (BBE), 12(2), 201-211.

Audi, M. & Ali, A. (2023). Unveiling the Role of Business Freedom to Determine Environmental Degradation in Developing countries. International Journal of Energy Economics and Policy, 13(5), 157-164.

Audi, M., & Ali, A. (2023). The role of environmental conditions and purchasing power parity in determining quality of life among big Asian cities. International Journal of Energy Economics and Policy, 13(3), 292-305.

Audi, M., Ali, A., & Hamadeh, H. F. (2022). Nexus Among Innovations, Financial Development and Economic Growth in Developing Countries. Journal of Applied Economic Sciences, 17(4).

Audi, M., Ali, A., & Kassem, M. (2020). Greenhouse Gases: A Review of Losses and Benefits. International Journal of Energy Economics and Policy, 10(1), 403.

Audi, M., Poulin, M., & Ali, A. (2024). Determinants of Business Freedom in Developing Countries: The Role of Institutional Development and Policy Mix. International Journal of Economics and Financial Issues, 13(4), 509-518.

Audi, M., Poulin, M., & Ali, A. (2024). Environmental Impact of Business Freedom and Renewable Energy: A Global Perspective. International Journal of Energy Economics and Policy, 14(3), 672-683.

Bibi, F., & Jamil, M. (2021). Testing environment Kuznets curve (EKC) hypothesis in different regions. Environmental Science and Pollution Research, 28(11), 13581-13594.

Borghesi, S. (2000). Income Inequality and the Environmental Kuznets Curve. Nota Dilavoro, No.83.

Boyce, J.K., (1994). Inequality as a cause of environmental degradation. Ecological Economics, 11,169–178.

Damania, R. (2002). Environmental Controls with Corrupt Bureaucrats. Environment and Development Economics, 7, 407-427.

Dogan, E., & Inglesi-Lotz, R. (2020). The impact of economic structure to the environmental Kuznets curve (EKC) hypothesis: evidence from European countries. Environmental science and pollution research, 27, 12717-12724.

du Plessis, A. (2023). South Africa’s Impending Water Crises: Transforming Water Crises into Opportunities and the Way Forward. In South Africa’s Water Predicament: Freshwater’s Unceasing Decline (pp. 143-170). Cham: Springer International Publishing.

Fredricksson, P. G. (1997). Environmental Policy Choice: Pollution Abatement Subsidies. Resource and Energy Economics, 20, 51-63.

Fredriksson, P. G. H. R. J. Vollenberg, and Dijkgraaf E. (2004). Corruption and Energy Efficiency in OECD Countries: Theory and Evidence. Journal of Environmental Economics and Management, 47(2), 207–231.

Friedl, B. and Getzner, M. (2003). Determinants of CO2 emissions in a small open economy. Ecological Economics, 45(1), 133– 148.

Givens, J. E., Huang, X., & Jorgenson, A. K. (2019). Ecologically unequal exchange: A theory of global environmental injustice. Sociology Compass, 13(5), e12693.

Grossman, G. and Krueger A. B. (1991). Environmental impacts of a North American free trade agreement. National Bureau of Economics Research Working Paper, No. 3194, NBER Cambridge.

Grossman, G. M. and Krueger, A. B. (1995). Economic growth and the environment. Q. J. Econ, 110,353–377.

Han C. and Lee H., (2013). Dependence of Economic Growth on Co2 Emissions. Journal of Economic Development, 38(1), 47-57.

Hassan, S. T., Khan, S. U. D., Xia, E., & Fatima, H. (2020). Role of institutions in correcting environmental pollution: An empirical investigation. Sustainable Cities and Society, 53, 101901.

Khan, A., Chenggang, Y., Bano, S., & Hussain, J. (2020). The empirical relationship between environmental degradation, economic growth, and social well-being in Belt and Road Initiative countries. Environmental Science and Pollution Research, 27, 30800-30814.

Khan, H., Weili, L., Khan, I., & Han, L. (2022). The effect of income inequality and energy consumption on environmental degradation: the role of institutions and financial development in 180 countries of the world. Environmental Science and Pollution Research, 29(14), 20632-20649.

Koyuncu, C. and Yilmaz R., (2009). The Impact of Corruption on Deforestation: Cross-country Evidence. The Journal of Developing Areas, 42(2), 213–222.

Kuznets, S. (1955). Economic Growth and Income Inequality. The American Economic Review, 45, 1-28.

Li, Q., Guo, J. J., Liu, W., Yue, X. G., Duarte, N., & Pereira, C. (2020). How knowledge acquisition diversity affects innovation performance during the technological catch-up in emerging economies: A moderated inverse u-shape relationship. Sustainability, 12(3), 945.

Lopez, R. and Mitra S. (2000). Corruption, Pollution, and the Kuznets Environment Curve. Journal of Environmental Economics and Management, 40, 137-150.

Magliocca, N. R., Rudel, T. K., Verburg, P. H., McConnell, W. J., Mertz, O., Gerstner, K., ... & Ellis, E. C. (2015). Synthesis in land change science: methodological patterns, challenges, and guidelines. Regional environmental change, 15, 211-226.

Magnani, E., (2000). The environmental Kuznets curve, environmental protection policy and income distribution. Ecological Economics, 32, 431-443.

Moomaw, W. R. and Unruh G. C. (1997). Are environmental Kuznets curves miss-leading us? The case of CO2 emissions. Environmental and Development Economics, 2, 451-463.

Moshood, T. D., Nawanir, G., Mahmud, F., Mohamad, F., Ahmad, M. H., & Abdul Ghani, A. (2022). Sustainability of biodegradable plastics: new problem or solution to solve the global plastic pollution? Current Research in Green and Sustainable Chemistry, 5, 100273.

Nasir, M., and Rehman, F. U. (2011). Environmental Kuznets curve for carbon emissions in Pakistan: An empirical investigation. Energy Policy, 39, 1857-1864.

Ostrom, E. (1998). A Behavioral Approach to the Study of Rational Choice Theory of Collective Action. American Political Science Review, 92(1), 1–22.

Pata, U. K., Yilanci, V., Hussain, B., & Naqvi, S. A. A. (2022). Analyzing the role of income inequality and political stability in environmental degradation: evidence from South Asia. Gondwana Research, 107, 13-29.

Ravallion, M., Heil M. and Jalan J. (2000). Carbon emissions and income inequality. Oxford Economic Papers,52, 651-669.

Rothman, D. S. (1998). Environmental Kuznets curve-real progress or passing the buck: A case for consumption-base approaches. Ecological Economics, 25, 177-194.

Sarkodie, S. A., & Adams, S. (2018). Renewable energy, nuclear energy, and environmental pollution: accounting for political institutional quality in South Africa. Science of the total environment, 643, 1590-1601.

Schoonover, R., Cavallo, C., Caltabiano, I., Femia, F., & Rezzonico, A. (2021). The Security Threat That Binds Us.

Scruggs, L. A. (1998). Political and economic inequality and the environment. Ecological Economics, 26, 259–275.

Selden, T. M. and Song. D.Q. (1994). Environmental Quality and Development: Is there a Kuznets Curve for Air Pollution Emission. Journal of Environmental Economics and Management, 27, 147-162.

Shafik, N. and Bandyopadhyay, S. (1992). Eco. Growth & Environmental Quality: Time-Series & Cross-Country Evidence. Background Paper -World Development Report 1992.

Sinha, A., Gupta, M., Shahbaz, M., & Sengupta, T. (2019). Impact of corruption in public sector on environmental quality: Implications for sustainability in BRICS and next 11 countries. Journal of Cleaner Production, 232, 1379-1393.

Sohail, M. T., Majeed, M. T., Shaikh, P. A., & Andlib, Z. (2022). Environmental costs of political instability in Pakistan: policy options for clean energy consumption and environment. Environmental Science and Pollution Research, 1-10.

Tacconi, L., & Williams, D. A. (2020). Corruption and anti-corruption in environmental and resource management. Annual Review of Environment and Resources, 45, 305-329.

Torras, M. and Boyce, J. K. (1998). Income, inequality and pollution: a reassessment of the environmental Kuznets Curve. Ecological Economics, 25,147–160.

Uroos, A., Shabbir, M. S., Zahid, M. U., Yahya, G., & Abbasi, B. A. (2022). Economic analysis of corruption: evidence from Pakistan. Transnational Corporations Review, 14(1), 46-61.

World Bank. (2011). Corruption and the Environment, Washington, DC.

Yang, B., Ali, M., Hashmi, S. H., & Jahanger, A. (2022). Do income inequality and institutional quality affect CO2 emissions in developing economies? Environmental Science and Pollution Research, 29(28), 42720-42741.

York, R. and Dietz, T. (2003). STIRPAT, IPAT and IMPACT: analytic tools for unpacking the driving forces of environmental impacts. Ecological Economics, 46, 351-365.

Zeeshan, M., Rehman, A., Ullah, I., Hussain, A., & Afridi, F. E. A. (2022). Exploring symmetric and asymmetric nexus between corruption, political instability, natural resources and economic growth in the context of Pakistan. Resources Policy, 78, 102785.