Research background
Economic growth significantly impacts national wealth and income per capita by enhancing Gross Domestic Product (GDP) and Gross National Income (GNI) Economists globally are increasingly interested in researching the relationship between economic growth, environmental sustainability, and societal well-being Many nations are now prioritizing the sustainable use of natural resources and environmental protection as key objectives of economic growth This shift indicates a growing awareness among countries to conserve scarce natural resources for future generations, rather than exploiting them without regard for environmental degradation.
Since its introduction in the 1987 Brundtland report by the World Commission on Environment and Development, sustainable development has gained significant traction globally Economists have explored the interplay between economic growth and sustainable development, often measuring it through genuine saving rates or adjusted net savings Numerous studies indicate a consistent relationship between sustainable development and economic growth.
Hamilton et al (1999) assessed genuine saving rates across both developing and developed nations by analyzing factors such as gross savings, fixed capital, educational expenditures, and pollution emissions Their findings revealed that high-income countries exhibited positive genuine saving rates, while developing countries showed negative rates This decline in genuine savings in developing nations is associated with a decrease in overall well-being.
1 The United Nations, Report of the World Commission on Environment and Development: Our Common
2 Hamilton C (1999), “The genuine progress indicator: methodological developments and results from
Australia.” Ecological Economics 30: 13–28 tot nghiep down load thyj uyi pl aluan van full moi nhat z z vbhtj mk gmail.com Luan van retey thac si cdeg jg hg
Atkinson et al (2003) investigated the link between natural resource abundance and the growth rate of GDP per capita, revealing a significant negative relationship between the two.
Grace et al (2004) discovered a correlation between the low annual GDP growth rate of the United Kingdom and its low genuine saving ratio to GDP when comparing genuine saving in Taiwan and the United Kingdom, representing one developed country and one industrial country in Asia.
A study by Dietz et al (2007) examined the genuine saving rates of both rich and poor natural resource countries, revealing that wealthier resource-rich nations tend to have lower genuine saving rates compared to their poorer counterparts Additionally, the research indicated that this negative impact on saving rates diminishes as the quality of institutions improves.
Therefore, economic growth affects significantly to genuine saving rate of a nation
Genuine saving rates are influenced by various factors, including institutional quality and resource abundance These rates are primarily determined by the economic growth rate, with developed countries typically exhibiting higher genuine saving rates compared to their developing counterparts.
Statement of problem
Economic growth rates of Vietnam in some decades ago were very impressive, especially after VIETNAM implemented its “Doi Moi” policy in 1986 Since that time,
Vietnam has adopted new economic strategies to enhance market openness with international corporations, resulting in one of the highest economic growth rates in Asia This growth has provided opportunities to improve living standards However, despite nearly 30 years of the "Doi Moi" reform period, Vietnam remains one of the poorest countries globally, with a per capita income of only $723 in 2010, even as the average economic growth rate was approximately 7.07% from 1996 to 2010.
3 Atkinson G., Hamilton K (2003), “Saving, Growth and the Resource Curse Hypothesis.” World Development
4 Grace T R Lin, Hope C (2004), “Genuine savings measurement and its application to the United Kingdom and Taiwan”, The Developing Economies XVII-1: 3−41.
The World Development Indicators dataset, accessible at the World Bank's data catalog, is classified as public and can be utilized by users both inside and outside the Bank It is licensed under Creative Commons Attribution 4.0, allowing for broad usage This dataset covers various topics including agriculture, climate change, economic growth, education, and health, among others Users can access the dataset in multiple formats and find related resources, including updates and archives.
Comparing Vietnam with some other countries such as Singapore and the Netherlands in the period from 1996 to 2010, we can see that an annual average growth rate of GDP in
Singapore was 5.87%, GDP per capita in 2010 was US$32,641 While the annual average
GDP growth of the Netherlands was only 2.2%, GDP per capita in 2010 is US$26,553
Singapore and the Netherlands are high-income countries, whereas Vietnam falls into the low-middle-income category This raises the question of whether there is a paradox in economic growth and development, as many nations experience higher growth rates despite having lower per capita income.
Sustainable development, also known as genuine saving, offers a fresh perspective for assessing a nation's growth quality and wealth This approach enhances traditional indicators by incorporating gross saving alongside factors such as fixed capital, education, environment, and natural resources Since 1996, the World Bank has adopted this indicator to provide a more comprehensive evaluation of economic progress.
“adjusted net saving” in World Development Indicators It also presents in the Little Green
The relationship between economic growth and various life aspects, including society, the environment, and natural resources, remains underexplored, particularly regarding the effects of current consumption on future generations This gap is especially evident in research focused on the impact of economic growth on sustainable development in Vietnam.
Research objectives
This study examines the influence of economic growth and various factors on sustainable development, with a particular focus on Vietnam Utilizing data from 90 countries sourced from the World Bank, the analysis covers the period from 1996 to 2010.
These main objectives will be as follows:
1.3.1 Evaluating the significance of economic growth on sustainable development
The World Development Indicators dataset, accessible at the World Bank's data catalog, is classified as public and can be utilized by users both inside and outside the organization It is licensed under Creative Commons Attribution 4.0, allowing for broad usage This dataset covers various topics including agriculture, climate change, economic growth, education, and health, among others Users can access the dataset in multiple formats and find related resources on the WDI products page.
1.3.2 Evaluating the effect of export raw agricultural products on sustainable development
1.3.3 Evaluating the effect of export natural resources on sustainable development
1.3.4 Evaluating the significance of economic growth on sustainable development in developing countries
1.3.5 Finding valuable lessons for sustainable development in Vietnam.
Research questions
From these above objectives, this paper will find answers to these questions:
1.4.1 Will faster growth lead to sustainable development?
1.4.2 Will wealthier economies be more sustainable than poorer economies?
1.4.3 Does the increased export of raw agricultural products lead to decrease of sustainable development?
1.4.4 Does the increased export of natural resource lead to decrease of sustainable development?
1.4.5 Will faster growth lead to sustainable development in developing countries?
1.4.6 Which lessons should Vietnam could apply to maintain the state of sustainable development?
Research methodology
This paper will apply both qualitative and quantitative methods for estimating the impact of economic growth such as GDP growth on sustainable development by OLS estimation
This paper establishes hypotheses based on models derived from historical empirical studies and tests their validity using econometric techniques.
To address the endogeneity issues between sustainable development and GDP growth, this paper will utilize Two-Stage Least Squares (TSLS) estimation This method will help determine if there is a reverse causation between GDP growth and sustainable development.
5 applied for finding the answer about the question: Do high adjusted net savings lead to high
Structure of thesis
This thesis comprises six chapters, beginning with an introduction to the research background and its significance for Vietnam's economic growth and sustainable development Chapter II reviews the literature on economic growth, economic development, and sustainable development, including empirical studies conducted by previous researchers Chapter III details the data collection process, data analysis, and the econometric techniques employed Finally, Chapter IV presents the results derived from hypothesis testing related to the models discussed in the thesis.
Chapter V will derive a state of sustainable development and some main points of Agenda
The concluding chapter of this article summarizes the key findings and proposes relevant policies It also addresses the limitations of the research topic and outlines potential avenues for future exploration.
7 Dimitrios Asteriou and Stephen G Hall, Applied Econometrics a modern approach, revised edition, Palgrave
Macmillan, 2007 tot nghiep down load thyj uyi pl aluan van full moi nhat z z vbhtj mk gmail.com Luan van retey thac si cdeg jg hg
Concepts of economic growth, economic development and sustainable development
Economic growth is quantitative change or expansion in a country's economy
Economic growth is conventionally measured as the percentage increase in GDP or GNP during one year (World Bank)
Economists have often conflated economic growth with economic development, yet while growth is essential, it alone does not guarantee development Additionally, GDP serves as a limited indicator of economic welfare, failing to account for crucial factors such as leisure time, access to health and education, environmental protection, freedom, and social justice.
While economic growth usually refers to increase in a country's production or income per capita, economic development mentions to broadly scope From the point of view of E
Economic development, as defined by Wayne from Kansas State University, involves not only economic growth but also shifts in output distribution and economic structure He emphasizes the importance of enhancing the material well-being of the lower half of the population, a reduction in agriculture's contribution to Gross National Income (GNI), and a corresponding rise in the GNP share of industry and services Additionally, he highlights the need for improvements in the education and skills of the labor force, along with significant technical advancements originating domestically.
E Wayne Nafziger's "Economic Development," fourth edition, published by Cambridge University Press in 2006, provides comprehensive insights into the field of economic development For those seeking to download the latest full version of the thesis, please contact via email at vbhtjmk@gmail.com for further assistance.
So economic development is qualitative change in a country's economy in connection with technological and social progress Main indicator of economic development is increasing
GNP per capita or GDP per capita, reflecting an increase in economic productivity and average material well being of a country's population
Three main objectives of economic development include:
(1) To increase the ability and widen the distribution of basic-life sustaining goods;
(2) To raise the level of livings;
(3)To expand the range of economics and social choices
Various indexes are utilized to assess a nation's development, reflecting different approaches For instance, the Human Development Index (HDI) measures human development, while the Gini index evaluates income distribution inequality.
The United Nations Development Program (UNDP) annually assesses national development through the Human Development Index (HDI), which evaluates human progress by integrating three key factors: income, life expectancy, and education.
The GINI index quantifies income distribution disparities within a nation, highlighting the gap between the wealthy and the overall income This issue of income inequality is prevalent both within individual countries and across nations, affecting even the most developed countries.
There have been many different definitions about sustainable development The
The 1987 Brundtland Report by the United Nations World Commission on Environment and Development introduces the fundamental concept of sustainable development, which is defined as meeting the needs of the present without compromising the ability of future generations to meet their own needs.
This definition expressed strongly that the current consumption of resources for economic development should not affect future generations This definition gives a general
9 The United Nations, Report of the World Commission on Environment and Development: Our Common
Future, 1987, p.15 tot nghiep down load thyj uyi pl aluan van full moi nhat z z vbhtj mk gmail.com Luan van retey thac si cdeg jg hg
8 concept for development; it did not give a way to measure factors contributing on sustainability
Pezzey (1992) defined sustainable development as a non-declining utility This definition is one of basic concepts in sustainable development Moreover, Pearce and
Atkinson (1997) developed a new paradigm of sustainable development, and they favor on the strong sustainability 10
The OECD defines sustainable development as a pathway that maximizes human well-being for current generations without compromising the well-being of future generations.
The United Nations (2008) emphasized that sustainable development must maintain a nation's wealth over time, relying on various production stocks, including fixed, human, social, and natural capital To address potential declines in these capital stocks, the UN proposed a limited set of indicators for international comparison, although they acknowledged the challenges in precisely defining and measuring this concept.
Approaches of sustainable development
Sustaining economic growth can occur in two ways One possibility is that there is limited substitutability between reproducible capital and nonrenewable resources, allowing for continuous economic growth even as nonrenewable resource stocks decline.
Second, technological changes will enable society to shift from reliance on non-renewable resource to another and finally to a new renewable resource
Sustainability can be understood through two main paradigms: ecological and neoclassical, often referred to as strong and weak sustainability These concepts address the relationship between reproducible and natural capital, questioning whether they can be maintained together or separately A key point of contention in this discussion is the extent to which natural capital can be substituted with reproduced capital.
10 Pezzey J (1992), “Sustainable Development concepts.” World Bank Environment paper Number 2
11 OECD, 2001, “Sustainable Development: Critical issues”, p 2
The United Nations (2008) emphasizes the importance of measuring sustainable development to ensure effective progress and accountability.
Natural capital refers to natural resources like coal, oil, forests, and land, while reproduced capital encompasses human-made or human capital Human-made capital can partially substitute for natural capital, thereby decreasing society's dependence on natural resources and enhancing the utility of services derived from both renewable and non-renewable stocks.
Weak sustainability emphasizes the need for significant substitutability between reproducible and natural capital This perspective suggests that as human-made capital becomes more valuable, it can effectively replace natural capital, leading to an overall increase in the value of the aggregate stock over time.
Strong sustainability emphasizes the need for substitutability between natural and reproduced capital To preserve future economic opportunities, it is essential to impose conditions on the depletion of natural capital.
2.2.1 Weak sustainability: the neoclassical paradigm
Weak sustainability emphasizes development that maintains welfare across generations, originating from economic rather than ecological perspectives According to Pezzey (1992), it involves a constraint on growth to ensure non-declining welfare over time.
In the case of reduction of welfare, he called it as “survivability”
Pearce and Atkinson (1997) proposed a formula for measuring sustainable development, grounded in the concept of unlimited substitution between man-made and natural capital, as well as Pezzey's definition of sustainable development.
The formula defines Z as an index of sustainable development, where DM represents the depreciation of man-made capital and DM/Y indicates the rate of this depreciation Additionally, DN signifies the depreciation of natural capital, with DN/Y reflecting its rate, while S denotes national savings and S/Y represents the saving rates.
13 Pearce D., Atkinson G., Hamilton K., Dubourg R., Young C and Munasinghe M (1997), Measuring
Sustainable Development: Macroeconomics and the Environment, Cheltenham: Edward Elgar Publishing Ltd.,
United Kingdom tot nghiep down load thyj uyi pl aluan van full moi nhat z z vbhtj mk gmail.com Luan van retey thac si cdeg jg hg
Sustainable development is considered weak when the variable Z is greater than zero This indicates that higher saving rates, in relation to depreciation of both natural and man-made capital, are essential for achieving sustainable development.
2.2.3 Strong sustainability: the ecological paradigm
In contrast with weak sustainability, strong sustainability stresses mainly on the substitution limitedly between man-made and natural capital A study by Herman Daly and
John Cobb (1999) advocated for strong sustainability due to the critical importance of certain natural resources in production, where their loss could lead to catastrophic consequences He noted that in some production processes, the decline in substitutability leads to the depletion of resource stocks Furthermore, Cobb argued that the elasticity of substitution between natural and reproducible capital is zero, highlighting the unique nature of certain forms of natural capital This underscores the necessity to conserve specific stocks of critical natural capital, irrespective of the associated opportunity costs.
They underestimated the role of prices and technological changes because of market imperfections brought about by a preponderance of large companies or State-own companies
Prices are not always an accurate reflection of resource scarcity and fail to consider the needs of future generations As technology evolves, it is expected to reduce prices over time However, the ecological perspective remains skeptical about the potential of technological advancements to effectively address environmental challenges in the future.
Objectives and significance of sustainable development
In 1992, the Earth Summit at the United Nations Conference on Environment and Development (UNCED) took place in Rio de Janeiro, Brazil, where the international community adopted Agenda 21 This landmark achievement integrated environmental, economic, and social concerns into a cohesive policy framework, offering numerous recommendations and detailed proposals for nations worldwide.
In "For the Common Good," Daly and Cobb (1999) explore the importance of sustainable economic practices that benefit society as a whole The authors argue for a shift in focus from individual gain to collective well-being, emphasizing the need for policies that promote environmental stewardship and social equity This work serves as a critical resource for understanding the intersection of economics and ethics in contemporary discussions.
11 those recommendations include reducing wasteful consumption patterns, alleviating poverty, protection of air, oceans and biodiversity, and developing sustainable agriculture 15
In the Johannesburg Declaration on sustainable development in 2002, the task of all nations in the world is “Taking action for Earth’s future” as follows: 16
Improving global equity and an effective global partnership for sustainable development;
Integration of environment and development at the international level;
Adoption of environment and development targets to revitalize and provide focus to the Rio process;
According to this summit, most important challenges which the world faces today include:
Increasing ability to meet the challenges of globalization;
Reducing waste and over-reliance on natural resources;
Ensuring people have access to the energy sources needed;
Reducing environment-related health problems;
Improving access to clean water to raise children and maintain their livelihoods for children.
Indicators of sustainable development
2.4.1 Adjusted net savings or genuine savings
Pearce et al (1997) and Hamilton et al (1999) developed a novel indicator for assessing sustainable development, aligning with the United Nations' guidelines from 1993 They quantified the cost of restoring the environment to its original state as the total of net investments in produced assets, along with changes in the stocks of natural resources and pollutants.
15 The United Nations, Earth Summit Agenda 21, Program of Action from Rio, 1992
The United Nations Johannesburg Summit 2002 focused on taking action for the future of Earth, emphasizing the importance of sustainable development and environmental protection.
The research examined the depletion of natural resources and carbon dioxide emissions from 1970 to 1993, revealing that numerous countries experienced negative rates of genuine savings However, a significant limitation of this method is its failure to consider human capital.
They added educational expenditure as value added in genuine savings, and used this formula for calculating genuine savings of many developing countries They defined genuine savings as follows:
Adjusted net savings or Genuine Savings = Gross Domestic Savings – Consumption of
Fixed Capital (Depreciation) + Education Expenditure – Depletion of Nonrenewable Natural
Graph 2.1 : How to calculate adjusted net savings
The adjusted net savings indicator serves as a proxy for sustainable development globally A study by Hamilton et al (1999) revealed that high-income countries exhibit positive adjusted net savings, whereas developing nations show negative values This decline in adjusted net savings is associated with a decrease in overall well-being.
2.4.2 Index of Sustainable Economic Welfare or ISEW
Daly et al (1999) developed the Index of Sustainable Economic Welfare (ISEW) to assess the connection between welfare and environmental degradation This index differentiates between various forms of pollution (including water, air, and noise), land loss (such as wetlands and farmland), and long-term environmental impacts by evaluating conventional national income accounts while incorporating the costs of environmental damage and natural resource depletion The ISEW has been referenced in numerous studies, including those by Lawn (2003) and Clarke (2005).
2.4.3 Genuine Process Indicators or GPI
The Genuine Progress Indicator (GPI) serves as an alternative measure for assessing sustainable development, offering a refined perspective on economic progress compared to traditional metrics like GDP By adjusting GDP values to account for factors such as income distribution, the depletion of social and natural capital, and the costs associated with mobility and pollution, GPI provides a more comprehensive understanding of economic well-being (Hamilton C 1999; Robert et al.).
2.4.4 Environmental Sustainability Index or ESI
Yale University calculated the Environmental Sustainability Index (ESI) 2005 using data from 140 countries provided by the World Bank The ESI is a composite profile of national environmental stewardship, based on 21 indicators that measure air and water pollution, environmental sustainability, biodiversity, and ecosystems The core measurement of environmental sustainability is linked to the inherent environmental carrying capacity and eco-efficiency, which can only change if society alters its production and consumption patterns (Lee et al 2005).
The pollution category includes 2 indicators: Air Quality (SYS_AIR) and Water Quality (SYS_WQL) The category for eco-efficiency related measures includes 9 indicators:
Biodiversity (SYS_BIO), Land (SYS_LAN), Reducing Air Pollution (STR_AIR), Reducing
Ecosystem Stress (STR_ECO), Reducing Waste and Consumption Pressures (STR_WAS),
Reducing Water Stress (STR_WAT) Natural resource Management (STR_NRM), Energy
Efficiency (CAP_EFF), and Greenhouse Gas Emissions (GLO_GHG)
2.4.5 Inclusive wealth index or IWI
Dasgupta (2007) proposed a method for measuring sustainable development through the concept of inclusive wealth He argued that sustainable development occurs when inclusive investment, relative to the population, is not negative Inclusive wealth represents the shadow value of an economy's productive base, while inclusive investment reflects the shadow value of the net change in that base Additionally, he emphasized the importance of integrating various indices, such as the Human Development Index, total fertility rate, and literacy rates, to assess economic performance comprehensively.
14 corruption, life expectancy at birth (years), under-5 mortality (per 1,000), rural population
Linkage of various determinants of sustainable development
Economic growth is typically measured by GDP or GNI, while economic development is assessed through the Human Development Index (HDI), which incorporates income, education, and life expectancy In contrast, sustainable development encompasses a wider scope, integrating economic, environmental, and social factors Harris et al (2001) emphasize that sustainable development should focus on three key activities.
Economic activities contribute to the growth of economic welfare and income of a nation; they ensure to the creation of jobs, competitiveness in trade, wealth of a nation and income
Environmental activities play a crucial role in conserving the environment and minimizing the consumption of both renewable and nonrenewable natural resources These efforts are essential for maintaining biodiversity, ensuring atmospheric stability, reducing CO2 emissions, and managing polluted wastewater effectively.
Social activities create fairness in distribution of these welfare opportunities for a community; including all social services such as health care programs, education, gender equity and accountability of politics
Sustainable development is achieved when a nation effectively integrates economic, social, and environmental activities It serves as a bridge connecting economic factors such as income and welfare, social factors including education expenditure and gender equity, and environmental considerations like pollution emissions and resource conservation While this concept has its limitations, it remains a crucial framework for understanding the key aspects of national development.
Sustainable development consists of three key components: economic growth, social inclusion, and environmental protection These elements work together to ensure a balanced approach to development that meets the needs of the present without compromising the ability of future generations to meet their own needs.
Source : http://www.myacpa.org/task-force/sustainability/primer.cfm
Benefits and drawbacks of adjusted net savings
Sustainable development is a crucial concept that integrates physical, human, and natural capitals, serving as a comprehensive indicator of a nation's development It highlights issues related to natural capital and extends beyond traditional national accounts This approach emphasizes that current consumption should prioritize not only economic growth but also the preservation of natural resources, reduction of air pollution, and investment for future generations Ultimately, excessive consumption today leads to greater depletion for future generations.
Hamilton et al (1999) established a link between a nation's income and sustainable development, revealing that high-income countries exhibit a positive genuine saving rate, whereas developing countries show a negative rate This negative genuine saving rate is associated with a decline in overall well-being.
Lele (1991) thought this concept emerged as the latest development catch phase and embraced it as the new paradigm of development
Grace et al (2004) suggested that this indicator can be utilized to define wealth in a broader context than traditional national accounts, aiming to capture the value of the net change across a comprehensive range of assets that are crucial for development.
Sustainable development offers clear benefits, yet it also reveals several drawbacks through its indicators The components of these indicators often overlook critical factors that directly or indirectly influence a country's development Notably, the formula for adjusted net savings, as outlined by the World Bank, highlights these complexities.
Bank introduced since 1997 are not fully reflect the environmental and social activities though these factors significantly impact to development of countries
Lele (1991) identified two key weaknesses in sustainable development: a limited understanding of poverty and environmental degradation, and confusion regarding the roles of economic growth, sustainability, and participation These issues result in inconsistencies and contradictions in policy-making, particularly evident in international trade, agriculture, and forestry.
J Ram (2005) showed that formula of adjusted net savings is imperfect measurement both conceptual and empirical characteristics and suggested that a global approach need to find another sustainability issues, and natural capital is not corporate in national accounting.
Empirical Models
Relating to determinants of the adjusted net savings in developing countries, Peter Hess
In 2010, a study estimated the determinants of sustainable development by analyzing adjusted net saving using cross-sectional data from developing economies between 2001 and 2006 The research focused on two types of savings: gross national savings and adjusted net savings, where adjusted net savings are defined as gross savings minus fixed capital Consequently, the influences on gross savings are crucial for understanding adjusted net savings Economic development was measured using the Human Development Index.
HDI The saving ability of a nation depends on the structure of the population or the age dependency ratio Many developing countries have a less developed financial system than
17 Peter Hess, Determinants of the adjusted net saving rate in developing economies, International Review of
Applied Economics, Vol 24, No 5, September 2010, 591–608 tot nghiep down load thyj uyi pl aluan van full moi nhat z z vbhtj mk gmail.com Luan van retey thac si cdeg jg hg
In developed countries, economic activity often occurs within informal sectors Therefore, formalizing the economy is essential, as it allows for the measurement of financial deepening, which is represented by the ratio of money supply to national income.
Adjusted net saving rates are influenced by natural resources, as income from exports of fuels, ores, and metals significantly contributes to a nation's savings Consequently, the depletion of these natural resources leads to a decline in adjusted net savings.
From these arguments, Hess showed the general equation for the adjusted net saving rates as follows:
ASY = f (HDI, GYP, APL, FIN, XR) (2-3)
The gross national saving rates, bolstered by export income from natural resources, significantly enhance government revenues and public savings The same key determinants were utilized to estimate a nation's gross saving rate.
SY =f ' (HDI, GYP, APL, FIN, XR) (2-4)
The adjusted net saving rate (ASY) from 2000 to 2006, alongside the Human Development Index (HDI) for 2000, provides insights into economic and social progress The average growth rate of real GDP per capita (GYP) reflects the economic performance during this period Additionally, the average share of the population aged 15-64 (APL) for 2000 and 2006 highlights demographic trends, while the ratio of liquid liabilities to GDP (FIN) in 2000 indicates the financial sector's size relative to the economy.
XR = share of fuels, ores, and metals in merchandise exports in 2000
SY = average gross national saving rate for 2001–2006
GX = average annual growth rate in exports of goods and services for 2000–2006
In 2000, foreign direct investment (FDY) as a share of GDP was analyzed, revealing that the Human Development Index (HDI), the percentage of the prime labor force population, the share of natural resources in exports, and financial development are crucial variables However, economic growth was not found to be a significant explanatory factor Instead, gross national savings and changes in the population share aged 15 to 64, along with the economic growth rate, emerged as significant determinants.
Using the reduced form equation to estimate economic growth, it is assumed that savings will directly contribute to investment By measuring the savings or investment rates of a nation, one can assess physical capital formation.
Adjusted net saving serves as a key indicator of net capital formation, reflecting economic growth While it accounts for human capital formation and natural resource depletion, it does so only partially The analysis incorporates factors such as the Human Development Index (HDI), Average Product of Labor (APL), real growth rate of goods and services exports, and the share of Foreign Direct Investment (FDI) in national output to estimate economic growth, as represented in the following equation:
GYP=g( ASY OR GRS, HDI, APL, GX FDY) (2-5)
The findings indicate that the saving rate does not have a statistically significant impact on the average annual change in the growth rate of real GDP per capita In contrast, both APL and GX are found to be statistically significant factors.
HDI and FDY are not explanatory variables
Dietz et al (2007) examined the relationship between resource abundance and indicators of institutional quality, specifically focusing on the lack of corruption, bureaucratic efficiency, and the rule of law Building on findings by Atkinson and Hamilton (2003), which highlighted a positive correlation between resource abundance and overall institutional quality in terms of gross investment and savings, they aimed to determine if the negative impact of resource abundance on genuine savings could be attributed to policy failures To address this, they developed a model that explains genuine savings through the interaction of natural resource endowment and institutional quality.
The study analyzed data from 115 countries over an 18-year period, focusing on the impact of various factors on gross savings Key determinants such as per capita income, economic growth, age dependency, and urbanization were found to have a significant and robust effect on gross saving rates The researchers developed two models to estimate gross savings and adjusted net saving rates, incorporating these additional factors.
GrossSR i,t=α+β1lnY i,t+β2Growthi,t-1+β3Agei,t+β4Urbani,t +β5Insti,t+β6Rsi,t+β7Insti,txRs i,t+Tt+ε i,t (2-6)
GSR i,t=α+β1lnY i,t+β2Growthi,t-1+β3Agei,t+β4Urbani,t +dβ5Insti,t+β6Rsi,t+β7Insti,txRs i,t+Tt+ε i,t (2-7)
They used reduced-form model, fixed effect estimation, GMM estimation and Arrellano-Bond dynamic model with variables genuine savings, gross savings, growth, GDP,
18 Dietz S., Neumayer E., Soysa I D (2007), “Corruption, the resource curse and genuine saving”, Environment and Development Economics 12:33-53
19 Atkinson G., Hamilton K (2003), “Saving, Growth and the Resource Curse Hypothesis.” World Development
31: 1793–1807 tot nghiep down load thyj uyi pl aluan van full moi nhat z z vbhtj mk gmail.com Luan van retey thac si cdeg jg hg
At the age of 19, the relationship between urbanization, investment, and resource rent reveals that wealthier resource-rich countries tend to have lower genuine savings compared to poorer resource-rich nations Additionally, institutional failures negatively impact genuine savings However, the detrimental effect of resource abundance on genuine savings diminishes as corruption levels decrease.
According to the key findings of Hess (2010) and Grace et al (2004), models have been developed to explore the relationship between economic growth and adjusted net savings, considering various determinants such as GDP growth rate (GDPGR), GDP per capita (GDPPC), Human Development Index (HDI), median age (MS AGE), urban growth rate (UBGR), and consumer price index (CPI).
Model 1: Faster growth of economics will lead to sustainable development
ANSi=α0+α1GDPGRi+α2HDIi+α3MSi+α4XRi+α5AGEi+α6UBGRi+α7CPIi+εi (2-8)
Where i denotes for country i, ε is residual
Models 2: Wealthier economies will be more sustainable than poorer economies
ANSi=β0+ β 1Lg(GDPPCi)+ β 2UBGRi+ β 3AGEi+ β 4XRi+ β 5 CPIi+μi (2-9)
Dietz et al (2007) and Atkinson et al (2003) discovered a negative relationship between adjusted net savings and natural resources In response to these findings, I developed two new models that focus on the export of raw agricultural products and ores and metals.
Model 3: Higher rate of agricultural export will be lessen sustainable development
ANSi=γ0+ γ 1AGRIi+ γ 2UBGRi+ γ 3MSi+ γ 4XRi+ γ 5AGEi+ γ 6CPIi+ψi (2-10)
Model 4: Higher rate of ores and metals export will be lessen sustainable development
ANSi=δ0+ δ 1ONMi+ δ 2UBGRi+ δ 3MSi+ δ 4XRi+ δ 5AGEi+ δ 6CPIi+φi (2-11)
Based on the findings of Hess (2010) and Hamilton et al (1999) regarding the determinants influencing adjusted net savings in developing countries, I developed an additional model, referred to as Model 1, utilizing data exclusively from these nations.
Model 5: Faster growth of economics will lead to sustainable development in developing countries
Empirical studies relating to sustainable development
Using data for 2001-2006 of developing economies, he estimates the determinants of the adjusted net saving rate For comparison, he also runs regression for estimating the determinants of gross saving
ASY=f (HDI, GYP, APL, FIN, XR) (2-13)
SY=f ' (HDI, GYP, APL, FIN, XR) (2-14)
The article discusses the GYP formula, which incorporates various factors such as ASY or GRS, HDI, APL, GX, and FDY It emphasizes the importance of downloading the latest full version of the thesis and provides contact information for further inquiries.
ASY= adjusted net saving rate for 2000-2006
SY = average gross national saving rate for 2001–2006
The Human Development Index (HDI) for the year 2000 reflects key indicators of human progress The average growth rate of real GDP per capita (GYP) serves as a crucial economic measure Additionally, the average share of the population aged 15-64 for the years 2000 and 2006 (APL) highlights demographic trends Furthermore, the average annual change in this age group's population share from 2000 onwards (CPL) provides insights into population dynamics and economic potential.
FIN= ratio of liquid liabilities to GDP in 2000
XR = share of fuels, ores, and metals in merchandise exports in 2000
GX=average annual growth rate in exports of goods and services for 2001–2006
FDY= foreign direct investment as a share of GDP in for 2001–2006
Hess found that the HDI, the percentage of population of labor force age from 15 to
Natural resources account for 64% of exports and significantly influence financial development However, economic growth itself is not a major explanatory variable Instead, gross national savings and the demographic shift in the population aged 15 to 64, along with the economic growth rate, emerge as key determinants.
The simultaneous model estimation for economic growth and adjusted net saving revealed that the results are unjustified, indicating that both adjusted net saving and gross saving have a statistically insignificant impact on the average growth rate of real GDP per capita.
Yacouba (2009) examined the relationship between adjusted net savings and changes in welfare from 1971 to 2000, utilizing panel data from 36 developing and developed countries The study employed the Human Development Index (HDI) and Infant Mortality Rate (IMR) as welfare proxies, with Gross National Income (GNI) as a control variable and adjusted net savings (NNS) as a regressor Using a fixed effect model for estimation, the findings indicated a significant positive relationship between adjusted net savings and welfare, although the effect size was relatively weak.
This study analyzes panel data from 115 countries over an 18-year period, sourced from the World Bank, to investigate the relationship between genuine saving, corruption, and the resource curse The researchers employed a reduced-form model, fixed effect estimation, and GMM estimation to derive their findings.
Arrellano-Bond dynamic model with variables genuine saving rate, gross saving, growth,
GDP, age, urbanization, investment and resource rent They set up two hypotheses for relationships as follows:
GrossSR i,t=α+β1lnY i,t+β2Growthi,t-1+β3Agei,t+β4Urbani,t +β5Insti,t+β6Rsi,t+β7Inst i,txRs i,t+Tt+ε i,t (2-16)
GSR i,t=α+β1lnY i,t+β2Growthi,t-1+β3Agei,t+β4Urbani,t +β5Insti,t+β6Rsi,t+β7Inst i,txRs i,t+Tt+ε i,t (2-17)
Research indicates that countries rich in resources tend to have a lower genuine saving rate compared to those with fewer resources Additionally, institutional failures can further diminish genuine saving levels However, the adverse impact of resource abundance on genuine saving is lessened when corruption is reduced.
A study conducted on the impact of economic growth on the environment in Pakistan, using time series data from 1971 to 2005, analyzed factors such as GDP per capita, carbon dioxide emissions, energy consumption, population, and urbanization Employing a VAR model and ADF test, the researchers found a positive long-term relationship between economic growth and carbon dioxide emissions This indicates that energy-driven economic development significantly contributes to increased carbon dioxide emissions.
This paper explores the conceptual and empirical aspects of genuine saving, highlighting its policy implications The study utilizes the World Bank's formula for measuring genuine savings.
GENSAV= (GDS-Dp+EDU-Rn,j-CO2damage)/GDP (2-18)
GENSAV is genuine domestic saving rates; GDS is gross domestic savings
Dp is depreciation of physical capital; EDU is current expenditure on education
Rn,i is the rent from depletion of i-th natural capital (energy, mineral and forest depletion are included); CO2 damage is damage from CO2 emissions
His analysis revealed that the measurement has both conceptual and empirical imperfections Additionally, he identified errors in the policy implications derived from this measurement.
From that, he suggested a global approach which need to find another sustainability issues, and natural capital is not corporate in national accounting
This study used data of 140 countries from World Bank for calculating ESI 2005 index They found that there are many variables such as GDP per capita; Land; Civil and
Political liberty influences environmental sustainability, which improves with higher income per capita, declining population, and greater civil and political freedoms The Environmental Sustainability Index (ESI) is a composite measure of national environmental stewardship, incorporating 21 indicators that assess air and water pollution, biodiversity, and ecosystem health Key metrics of environmental sustainability are linked to the environmental carrying capacity and eco-efficiency Changes in these metrics require a transformation in societal production and consumption patterns Despite some overlap, there is no direct correlation between pollution measures and eco-efficiency indicators related to environmental sustainability.
From the time series data of United Kingdom and Taiwan from 1970 to 1998, they calculate genuine saving in each country by using robustness analysis and sensitivity analysis
From the formula of World Bank, they adjust by adding the deduction of air and water pollution cost
Genuine Savings or Adjusted net saving = Gross Domestic Savings – Consumption of
Fixed Capital (Depreciation) + Education Expenditure – Air pollution cost – Water pollution cost – CO2 Damage Costs- nonrenewable natural resource depletion costs
(2-19) They found that UK has a lower rate of genuine saving than Taiwan and lower annual GDP growth rate exhibits low rate of genuine saving to GDP
In their study, they used data of 91 countries from 1980 to 1995, the World Bank
The study identifies genuine saving, GDP8095, GDP80, education, and investment as key variables Utilizing cross-section econometrics, the researchers discovered a significant negative relationship between natural resource abundance and the growth rate of GDP per capita.
The resource curse hypothesis suggests that the inability of governments to manage substantial resource revenues sustainably may lead to negative economic outcomes Additionally, the findings indicate that countries experiencing slow growth often suffer from a combination of natural resource management, macroeconomic policies, and public expenditure strategies that result in low rates of genuine saving.
Using data from the 1970s, 1980s, and 1990s provided by the World Bank, researchers calculated the genuine saving rates for various countries This calculation involved a formula that incorporates gross domestic investment, net foreign borrowing, gross saving, depreciation, and net saving.
Genuine Savings or Adjusted net saving = Gross Domestic Savings – Consumption of
Fixed Capital (Depreciation) + Education Expenditure – Depletion of Nonrenewable
Natural Resources – CO2 Damage Costs (2-20)
The analysis reveals that high-income countries exhibit a positive genuine saving rate, whereas developing countries experience a negative rate This negative genuine saving rate is associated with a decline in overall well-being.
Table 2.2: Summary of empirical studies related to sustainable development
No Researchers Data and scope of research
Adjusted net saving and Gross Saving,
- HDI, CPL, FIN, XR are important
36 countries, developed and developing countries, period 1971-2000
- Panel data, fixed effect model
- Sagan and Basman test for quality of instrument
Positive relationship between ANS and HDI, IMR, GNI but weak magnitude
115 countries, 18 years, World Bank data
Panel data Using reduced form, fixed effect estimation, GMM estimation
- Rich resource countries have lower rate of ANS than poor resource countries
Chapter remarks
This chapter focus on theoretical literature with definitions of economic growth, economic development and sustainable development; the ways to measure sustainable
Economic growth -GDP growth -GDPPC
Control variables HDI, MS, AGE, UBGR, CPI
Export -Raw agricultural products AGRI
Instrumental variables ELF85 tot nghiep down load thyj uyi pl aluan van full moi nhat z z vbhtj mk gmail.com Luan van retey thac si cdeg jg hg
Economic growth and sustainable development are closely linked in both developed and developing countries Numerous studies indicate that a high rate of economic growth can promote sustainable development However, various factors significantly influence sustainable development, including natural resources, institutional quality, age dependency ratio, urbanization, and human investment.
Econometric techniques
This study employs Ordinary Least Squares (OLS) estimation to analyze cross-sectional data, focusing on the relationship between adjusted net savings and various determinants, including GDP growth, GDP per capita, age, unemployment growth rate, consumer price index, human development index, and monetary supply Additionally, the analysis tests for specification errors such as autocorrelation, heteroskedasticity, and stability at significance levels of 1%, 5%, and 10%.
To address the endogeneity issue between adjusted net savings and GDP growth, the model will be estimated using Two-Stage Least Squares (2TLS) estimation In this approach, the Ethno-Linguistic Fractionalization (ELF) index will serve as an instrumental variable for GDP growth or GDP per capita (GDPPC) This index accounts for the potential reverse causality where income growth influences adjusted net savings The ELF is defined as follows: where \( n_i \) represents the number of individuals in the \( i \)-th group, \( N \) is the total population, and \( I \) is the number of ethno-linguistic groups within the country.
The Ethno-Linguistic Fractionalization (ELF) index quantifies the likelihood that two randomly chosen individuals from a country belong to the same ethno-linguistic group, with a higher ELF indicating greater fragmentation within the country Mauro's 1995 study revealed that corruption negatively impacts investment and, consequently, economic growth His findings were validated through robust testing that controlled for endogeneity by employing the ELF index as an instrumental variable.
20 Dimitrios Asteriou and Stephen G Hall, Applied Econometrics a modern approach, revised edition, Palgrave
Macmillan, 2007 tot nghiep down load thyj uyi pl aluan van full moi nhat z z vbhtj mk gmail.com Luan van retey thac si cdeg jg hg
33 that higher ELF, higher corruption so worse institution and that would be bad for growth It means that there are relationship between ELF and GDP growth 21
This paper utilizes ELF as an instrumental variable to address endogeneity issues, based on the assumption that ELF influences GDP growth without impacting adjusted net savings An over-identifying instrument test will be conducted, with the null hypothesis positing that ELF affects adjusted net savings solely through its effect on GDP growth.
Model 1: Faster growth of economics will lead to sustainable development
ANSi=α0+α1GDPGRi+α2HDIi+α3MSi+α4XRi+α5AGEi+α6UBGRi+α7CPIi+εi (3-1)
Where i denotes for country i, ε is residual Null hypothesis H0: there is no relationship between adjusted net saving and average GDP growth in period 1996-2010
Alternative hypothesis Ha: there is a between adjusted net saving and average GDP growth in period 1996-2010
If α1>0: there is a positive relationship between adjusted net savings and GDP growth
If α10: there is a positive relationship between adjusted net savings and income per capita
If β10: there is a positive relationship between adjusted net savings and export of agricultural products
If γ10: there is a positive relationship between adjusted net savings and export of ores and metals
If δ10: there is a positive relationship between adjusted net savings and economic growth in developing countries
If α1