Research background
Many countries are now prioritizing the conservation of their limited natural resources for future generations, instead of exploiting them recklessly This shift reflects increased awareness of environmental degradation and the importance of sustainable practices to protect our planet’s ecological balance.
Since its first introduction in the 1987 Brundtland Report by the World Commission on Environment and Development, the concept of sustainable development has gained global prominence Economists have actively explored the link between economic growth and sustainable development, often measuring sustainability through metrics such as genuine saving rates or adjusted net savings Numerous studies demonstrate a consistent relationship between sustainable development and economic growth, highlighting the importance of integrating environmental considerations into economic policies for long-term prosperity.
Hamilton et al (1999) analyzed genuine saving rates across both developing and developed countries, revealing that high-income nations typically exhibit positive genuine savings rates, while developing countries often experience negative rates These negative savings rates can indicate unsustainable economic practices and may lead to diminished well-being over time Factors such as gross savings, fixed capital investments, educational expenditures, and polluted emissions were considered to calculate these rates, highlighting the importance of sustainable development metrics for assessing long-term economic health.
1 The United Nations, Report of the World Commission on Environment and Development: Our Common Future, 1987
Hamilton (1999) discusses the development and application of the Genuine Progress Indicator (GPI) as an alternative measure of economic and social well-being, emphasizing its methodological advancements and results observed in Australia The study highlights how GPI offers a more comprehensive assessment of sustainable development by accounting for environmental and social factors often overlooked by traditional GDP metrics Implementing GPI can lead to better policymaking aimed at improving genuine quality of life, making it a valuable tool for evaluating progress beyond purely economic indicators.
Atkinson et al (2003) examined the impact of natural resource abundance on GDP per capita growth, revealing a significant negative relationship Their findings suggest that higher natural resource wealth may hinder economic growth rather than promote it, highlighting potential challenges associated with resource dependence This study underscores the importance of managing natural resources effectively to support sustainable economic development.
Grace et al (2004) found that the United Kingdom, a developed country with a low annual GDP growth rate, also exhibited a correspondingly low genuine saving ratio to GDP This study highlights the relationship between economic growth and genuine savings in both Taiwan and the UK, emphasizing how lower GDP growth may be linked to reduced savings levels in advanced economies.
A 2007 study by Dietz et al revealed that rich resource-dependent countries tend to have lower genuine saving rates compared to poorer resource-rich nations The research highlights that enhancing institutional quality can mitigate this negative effect, leading to improved savings performance in resource-dependent economies These findings emphasize the importance of strong institutions in promoting sustainable economic development in resource-rich countries.
Therefore, economic growth affects significantly to genuine saving rate of a nation
Genuine saving rates are significantly influenced by factors such as institutional quality and resource availability These rates are closely linked to the overall economic growth, with developed countries typically exhibiting higher genuine saving rates compared to developing nations Optimizing institutional frameworks and resource management can enhance savings and promote sustainable economic development.
Statement of problem
Vietnam’s impressive economic growth rates following the implementation of the “Doi Moi” policy in 1986 transformed its economy, promoting market openness and attracting international investment As a result, Vietnam has become one of the fastest-growing economies in Asia, creating opportunities to improve living standards nationwide Despite an average economic growth rate of 7.07% between 1996 and 2010, nearly 30 years after the reform, Vietnam remains one of the poorest countries globally, with a per capita income of only $723 in 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, available at http://data.worldbank.org/data-catalog/world-development-indicators, offer comprehensive global data crucial for understanding economic and social trends These indicators are essential for research, policy-making, and academic analysis, providing up-to-date and reliable information For those seeking to download the latest thesis or academic research papers, it is recommended to access credible sources and utilize official platforms for accurate data collection Contacting academic advisors or emailing relevant institutions can facilitate access to full thesis documents and detailed studies Stay informed with the newest research updates to support your academic and professional pursuits efficiently.
From 1996 to 2010, Singapore experienced a remarkable average annual GDP growth rate of 5.87%, with GDP per capita reaching US$32,641 in 2010, highlighting its rapid economic development In comparison, the Netherlands saw a more modest average annual GDP growth of 2.2%, with a GDP per capita of US$26,553 in 2010, reflecting steadier economic progress Comparing Vietnam to these countries, it is evident that Singapore's rapid growth outpaced the Netherlands, emphasizing the varying economic trajectories among these nations during this period.
Singapore and the Netherlands are high-income countries, whereas Vietnam is classified within the low to middle-income group This discrepancy highlights a global phenomenon where nations experience rapid economic growth but still have relatively low per capita income levels Such cases raise important questions about the apparent paradox between economic growth rates and overall development, emphasizing the need to understand how wealth is distributed and measured across different countries.
Sustainable development, also known as genuine savings, offers a fresh perspective for assessing a nation's growth quality and overall wealth This approach expands beyond traditional indicators by incorporating gross savings alongside key factors such as fixed capital, education, environmental health, and natural resources, making it a more comprehensive and valuable measure Since 1996, the World Bank has utilized this indicator to evaluate sustainable economic progress and ensure that growth benefits are maintained without depleting essential assets.
“adjusted net saving” in World Development Indicators It also presents in the Little Green Data Book from 2000
Understanding the relationship between economic growth and societal well-being, environmental sustainability, and natural resources is crucial for fostering sustainable development Currently, there is a research gap in examining how the consumption patterns of the present generation impact future generations, particularly in Vietnam Addressing this gap is essential for developing policies that balance economic growth with environmental conservation and social equity Exploring this dynamic can help ensure that Vietnam's economic progress does not compromise the well-being of future generations or violate principles of sustainability.
Research objectives
These main objectives will be as follows:
1.3.1 Evaluating the significance of economic growth on sustainable development
The World Bank's World Development Indicators provide comprehensive data essential for analyzing global development trends Accessing up-to-date statistics from this database is crucial for researchers and policymakers seeking insights into economic, social, and environmental progress worldwide For the latest information, visit http://data.worldbank.org/data-catalog/world-development-indicators and utilize these resources to support data-driven decision-making and research projects.
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
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
of economic growth such as GDP growth on sustainable development by OLS estimation
This paper develops hypotheses based on longstanding empirical studies and rigorously tests their validity using advanced econometric techniques.
This paper employs Two-Stage Least Squares (TSLS) estimation to address potential endogeneity issues between sustainable development and GDP growth TSLS is used to test for the existence of reverse causation between these two variables The study aims to determine whether higher adjusted net savings contribute to increased GDP growth, providing insights into the causal relationship between sustainable development indicators and economic performance.
Structure of thesis
This thesis is structured into six chapters Chapter I introduces the research background, highlighting the importance of economic growth and sustainable development within Vietnam’s economic context Chapter II reviews relevant literature on economic growth, economic development, and sustainable development, including empirical studies conducted by other researchers over the past decades Chapter III details the data collection process, data analysis methods, and econometric techniques used for analysis Chapter IV presents the research findings, focusing on testing hypotheses related to the models developed in this study, to provide insights into Vietnam's economic performance and sustainability efforts.
Chapter V will derive a state of sustainable development and some main points of Agenda
This article concludes by summarizing the main findings related to the topic in Vietnam, providing valuable insights for readers It offers a comprehensive overview of key insights and recommends effective policies to address the issues discussed Additionally, the study acknowledges certain limitations, highlighting areas for future research to deepen understanding Finally, it suggests potential pathways for further investigation to expand knowledge and improve policy implementation in Vietnam.
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)
Traditionally, economists have often conflated economic growth with economic development, but while growth is necessary, it is not sufficient for true development Gross Domestic Product (GDP) remains a limited measure of economic welfare, as it fails to capture important aspects such as leisure, access to healthcare and education, environmental sustainability, and social justice A comprehensive approach to economic development must consider these broader factors to accurately reflect improved living standards and overall well-being.
2.1.2 Economic development 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 at Kansas State University emphasizes sustainable growth characterized by shifts in output distribution and economic structure Key indicators include the improved material well-being of the poorer population, a declining share of agriculture in GNI, and rising contributions from industry and services Additionally, advancements in education, workforce skills, and significant technological progress within the country are crucial drivers of this development.
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Economic development refers to qualitative changes in a country's economy driven by technological and social progress A key indicator of economic development is the rise in GNP per capita or GDP per capita, which signifies increased economic productivity This growth reflects an improvement in the average material well-being of a country's population, highlighting the positive impact of overall economic progress.
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
There are numerous indexes used to measure and evaluate a nation's development, each focusing on different aspects For example, the Human Development Index (HDI) assesses overall human progress, while the GINI Index measures income inequality within a country The choice of development indices depends on specific development approaches and objectives, providing a comprehensive understanding of a nation's social and economic progress Incorporating these key metrics helps policymakers and researchers analyze development trends effectively.
The United Nations Development Program (UNDP) annually ranks countries based on the Human Development Index (HDI), a key metric that measures a nation's overall development The HDI considers essential factors such as income levels, life expectancy, and educational attainment to provide a comprehensive view of human progress By analyzing these indicators, the HDI offers insights into a country's social and economic well-being, making it a vital tool for understanding global development trends.
The GINI index is a key measure of income inequality within a nation, reflecting how income is distributed between the rich and the total population It highlights disparities in income distribution that can occur both domestically and internationally, impacting countries across all levels of development Notably, even highly developed countries face issues related to income inequality, as indicated by their GINI index scores, emphasizing the importance of understanding and addressing economic disparities worldwide.
2.1.3 Sustainable development There have been many different definitions about sustainable development The United Nations Brundtland report at World Commission on Environment and Development in 1987 gives a basic idea about sustainable development This concept defines sustainable development as : “… meets the needs of the present without compromising the ability of future generations to meet their own needs " 9
This definition expressed strongly that the current consumption of resources for economic development should not affect future generations This definition gives a general
The United Nations' 1987 report, "Our Common Future" by the World Commission on Environment and Development, emphasizes the importance of sustainable development for ensuring the well-being of future generations This influential document advocates for integrated approaches to environmental protection and economic growth, highlighting the need for global cooperation to address ecological challenges It underscores the crucial role of responsible policies and collective action in achieving sustainable development goals worldwide.
8 concept for development; it did not give a way to measure factors contributing on sustainability
Sustainable development is fundamentally defined as non-declining utility, a core concept established by Pezzey (1992) Building on this, Pearce and Atkinson (1997) introduced a new paradigm that emphasizes strong sustainability, highlighting the importance of maintaining natural capital for future generations.
The Organization for Economic Cooperation and Development (OECD) defines sustainable development as a development path that maximizes present human well-being without compromising the ability of future generations to meet their own needs This approach emphasizes balancing economic growth, environmental protection, and social equity to ensure long-term sustainability.
The United Nations (2008) emphasizes that sustainable development must ensure the preservation of a nation’s wealth over time It is grounded in various production stocks, including fixed capital, human capital, social capital, and natural capital, which need to be maintained or replenished to prevent decline The UN group proposed a concise set of indicators for international comparison of sustainability, acknowledging that measuring this concept remains a complex and challenging task.
Approaches of sustainable development
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 approached through two main paradigms: the ecological (strong sustainability) and the neoclassical (weak sustainability) models Strong sustainability emphasizes preserving natural capital as irreplaceable, while weak sustainability allows for substituting natural capital with human-made capital The key debate centers on whether natural and reproduced capital can be maintained together or should be managed separately, highlighting the importance of understanding the degree of substitutability between these resources for sustainable development.
10 Pezzey J (1992), “Sustainable Development concepts.” World Bank Environment paper Number 2
11 OECD, 2001, “Sustainable Development: Critical issues”, p 2
12 The United Nations, 2008, “Measuring Sustainable Development” 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
Natural capital means the natural resources such as coal, oil, forest, land and reproduced capital means human capital or human made capital Because human made capital can substitute for natural capital to some extent reproducible capital, it can reduce society's reliance on natural resources by increasing the usefulness of services provided by non renewable and renewable stocks
Weak sustainability emphasizes the importance of a high degree of substitutability between reproducible and natural capital Under this approach, human-made capital becomes more valuable, replacing natural resources to maintain overall wealth Over time, the value of the aggregate stock increases as human innovation and substitution efforts compensate for natural resource depletion, supporting economic growth within a sustainability framework.
Strong sustainability emphasizes the importance of the substitutability between natural and reproduced capital, highlighting that maintaining future economic opportunities requires careful management of natural resources Ensuring enduring economic growth involves setting conditions to prevent the irreversible depletion of natural capital, which is essential for sustainable development.
2.2.1 Weak sustainability: the neoclassical paradigm Weak sustainability refers to development which is not diminishing from one generation to another It comes from ideas of economists rather than ecologists This means a constraint on growth which Pezzey (1992) pointed out it as non-declining welfare over time
In the case of reduction of welfare, he called it as “survivability”
Pearce and Atkinson (1997) propose a formula to measure sustainable development, grounded in the concept of unlimited substitution between man-made and natural capital, as well as Pezzey’s definition of sustainability They emphasize that sustainable development involves maintaining the overall stock of capital—both natural and human-made—by allowing for their substitution without compromising future generations' ability to meet their needs This approach highlights the importance of balancing economic growth with environmental preservation, ensuring that natural resources are managed sustainably while recognizing the flexibility to substitute different types of capital Their model provides a comprehensive framework for evaluating sustainability through the interconnectedness of natural and artificial assets.
The formula analyzes sustainable development by using key indicators such as Z, which represents the sustainability index It considers depreciation rates of both man-made and natural capital—D M and D N respectively—along with their ratios to output (D M /Y and D N /Y) Additionally, the model incorporates national savings (S) and the saving rate (S/Y) to evaluate how savings contribute to maintaining long-term economic and environmental balance.
The 1997 publication "Measuring Sustainable Development: Macroeconomics and the Environment" by Pearce, Atkinson, Hamilton, Dubourg, Young, and Munasinghe provides a comprehensive framework for assessing sustainability through economic and environmental indicators This work emphasizes the importance of integrating macroeconomic analysis with environmental considerations to effectively evaluate sustainable development It offers valuable insights into methods for measuring progress toward sustainability, highlighting the need for holistic and multidisciplinary approaches The book serves as a foundational resource for researchers and policymakers aiming to develop sustainable economic policies that balance growth with environmental preservation.
Sustainable development is considered weak when the value of Z exceeds zero, indicating that higher saving rates lead to increased depreciation of both natural and man-made capital Conversely, if Z is less than or equal to zero, the development is deemed unsustainable, emphasizing the importance of maintaining adequate savings to ensure long-term sustainability Therefore, promoting higher savings rates is crucial for achieving sustainable development by preserving vital natural and man-made resources.
2.2.3 Strong sustainability: the ecological paradigm
Strong sustainability emphasizes limited substitution between man-made and natural capital, focusing on preserving critical natural resources Herman Daly and John Cobb (1999) support this approach because the loss of vital natural resources can cause catastrophic ecological and economic impacts They highlight that in some production processes, natural capital is irreplaceable, leading to a decline in substitutability and depletion of resource stocks Additionally, the elasticity of substitution between natural and reproducible capital is zero for certain critical natural assets, underscoring the need for their conservation regardless of 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 an imperfect signal of resource scarcity, as they do not account for the interests of future generations Technological advancements over time tend to lower prices in the future, enhancing resource availability However, the ecological perspective remains pessimistic about the potential of technological change to effectively address environmental challenges in the future.
Objectives and significance of sustainable development
The 1992 Earth Summit at the United Nations Conference on Environment and Development (UNCED) in Rio de Janeiro marked a pivotal moment in global environmental policy During this summit, the international community adopted Agenda 21, a groundbreaking framework that integrates environmental, economic, and social concerns into a comprehensive policy approach Agenda 21 provides detailed recommendations and proposals for nations worldwide to promote sustainable development and address pressing environmental challenges.
The article emphasizes key strategies for promoting sustainability and the common good, including reducing wasteful consumption, alleviating poverty, and protecting the environment It advocates for safeguarding air quality, oceans, and biodiversity while supporting sustainable agricultural practices to ensure long-term ecological balance and social well-being.
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
of net investment in produced assets and these changes in the various stocks of natural resources and pollutants
15 The United Nations, Earth Summit Agenda 21, Program of Action from Rio, 1992
The 2002 Johannesburg Summit, organized by the United Nations, emphasized the urgent need for global action to ensure a sustainable future for our planet The summit focused on taking concrete steps to address environmental challenges, promote sustainable development, and foster international cooperation to protect Earth's resources As a pivotal event in environmental diplomacy, it underscored the importance of collective responsibility and strategic initiatives in safeguarding our planet’s future.
Their research primarily examined natural resource depletion and carbon dioxide emissions through time series data from 1970 to 1993 The study revealed that many countries experienced negative rates of genuine savings, indicating unsustainable economic practices However, a key limitation of this approach is that it does not account for human capital, which plays a crucial role in long-term sustainable development.
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
According to the World Bank, this indicator serves as a key proxy for assessing sustainable development worldwide A study by Hamilton et al (1999) demonstrated that adjusted net savings are positive in high-income countries, indicating better sustainability, whereas developing nations often exhibit negative adjusted net savings Negative rates of this indicator in developing countries can lead to a decline in overall well-being, highlighting the importance of promoting sustainable development strategies globally.
2.4.2 Index of Sustainable Economic Welfare or ISEW Daly et al (1999) introduced an index to measure the relationship between welfare and depletion of environment It is an Index of Sustainable Economic Welfare or ISEW This index distinguishes between pollution (water, air and noise), loss of land (wet land, farmland) and long-term environment by comparing conventional national income account and taking factors of environmental damages and natural resource into account We can see this index in many studies (Lawn, 2003; Clarke 2005) 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
2.4.3 Genuine Process Indicators or GPI There is another indicator for measuring sustainable development, for example, Genuine Process Indicator or GPI – one version of ISEW This indicator assesses the economic progress of conventional measure like GDP From GDP, they got value of GPI by adjusting the value of some factors such as the effects of income distribution, the depletion of social and natural capital and costs of mobility and pollution (Hamilton C 1999; Robert et al
2.4.4 Environmental Sustainability Index or ESI Yale University used data of 140 countries from the World Bank for calculating Environmental Sustainability Index or ESI 2005 It is a composite profile of national environmental stewardship based on a compilation of 21 indicators These are indicators for measuring pollution of air and water quality, environmental sustainability, biodiversity and ecosystem The fundamental measurement of environmental sustainability relates to the endowed environmental carrying capacity and eco-efficiency These sources cannot change unless a society changes the way it produces and consumes (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:
Effective natural resource management is essential for preserving biodiversity (SYS_BIO) and ensuring sustainable land use (SYS_LAN) Reducing air pollution (STR_AIR) and ecosystem stress (STR_ECO) are critical for maintaining healthy environments, while minimizing waste and consumption pressures (STR_WAS) helps protect resources for future generations Addressing water stress (STR_WAT) is vital for sustaining ecosystems and human needs, supported by initiatives aimed at improving water efficiency Enhancing energy efficiency (CAP_EFF) reduces greenhouse gas emissions (GLO_GHG), contributing to climate change mitigation Overall, integrated strategies targeting these key areas promote a balanced approach to environmental conservation and sustainable development.
2.4.5 Inclusive wealth index or IWI Dasgupta (2007) suggested the method to measure sustainable development by using the concept inclusive wealth He noted an economy would enjoy sustainable development if and only if, relative to its population, inclusive investment is not negative An economy’s inclusive wealth is the shadow value of its productive base, and inclusive investment is the shadow value of the net change in its productive base He considered the process of creating economic performance by combining many other indexes such as Human Development Index, total fertility rate, adult literacy (percent), female literacy (percent), index of government 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
14 corruption, life expectancy at birth (years), under-5 mortality (per 1,000), rural population (percent of total population).
Linkage of various determinants of sustainable development
Economic growth is typically measured by increases in GDP or GNI, while economic development is often represented by the Human Development Index (HDI), which integrates income, education, and life expectancy Sustainable development encompasses a broader concept than economic growth and development by simultaneously addressing economic, environmental, and social factors Harris et al (2001) emphasize that sustainable development should focus on three key activities: promoting economic growth, ensuring environmental protection, and advancing social equity, highlighting its multi-dimensional approach.
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 reducing the consumption of both renewable and nonrenewable natural resources These efforts support the preservation of biodiversity, help maintain atmospheric stability, lower CO2 emissions, and control polluted wastewater Implementing sustainable practices through environmental initiatives is essential for safeguarding our planet’s health and ensuring eco-friendly economic development.
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 successfully integrates economic, social, and environmental activities simultaneously It acts as a bridge connecting economic factors like income and welfare, social aspects such as education expenditure, healthcare, and gender equity, and environmental concerns including pollution control and natural resource conservation Although the concept has certain limitations, it remains the most comprehensive framework for evaluating national progress by addressing the key pillars of development.
Sustainable development comprises three core components: economic growth, environmental protection, and social inclusion Balancing these elements is essential to ensure a prosperous and resilient future for communities worldwide Integrating these components promotes long-term sustainability by fostering responsible resource management, social equity, and economic stability Understanding the interconnectedness of these factors is crucial for developing effective strategies that support sustainable progress.
Source : http://www.myacpa.org/task-force/sustainability/primer.cfm
Benefits and drawbacks of adjusted net savings
Sustainable development is a vital concept because it integrates physical, human, and natural capitals, providing a comprehensive indicator of a nation's progress Unlike traditional measures, it highlights issues related to natural resources, air pollution, and environmental degradation, emphasizing that current consumption should not compromise future generations By balancing economic growth with environmental preservation, sustainable development ensures that natural resources are conserved and invested in for future well-being, recognizing that increased consumption today leads to greater depletion of resources for tomorrow.
Hamilton et al (1999) established a link between sustainable development and a nation's income levels, highlighting that high-income countries typically have a positive genuine saving rate, whereas developing countries often experience negative savings rates A negative genuine saving rate is associated with declining well-being and long-term sustainable growth, emphasizing the importance of promoting positive savings to support sustainable development worldwide.
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 used to assess wealth more comprehensively than traditional national accounts, capturing the net change in a wide range of assets essential for development.
Sustainable development offers clear benefits, but it also has notable limitations The current indicators often overlook key factors that directly or indirectly influence a country's growth For instance, the World Bank's adjusted net savings formula, introduced in 1997, does not fully account for environmental and social activities, despite their significant impact on national development.
Lele (1991) identified key weaknesses in sustainable development, including an incomplete understanding of poverty and environmental degradation, as well as confusion regarding the roles of economic growth, sustainability, and participation These shortcomings can lead to policy inadequacies and contradictions, particularly evident in sectors such as international trade, agriculture, and forestry Addressing these issues is essential for formulating effective and coherent sustainability strategies.
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
In 2010, a study estimated the determinants of sustainable development and adjusted net saving using cross-sectional data from developing economies between 2001 and 2006 The research incorporated both gross national savings and adjusted net savings, with the latter calculated by subtracting fixed capital from gross savings, highlighting the importance of factors influencing gross savings Economic development was measured through the Human Development Index (HDI), while a nation's saving capacity was shown to depend on demographic factors such as the age dependency ratio The study also noted that many developing countries possess less developed financial systems, which impact their ability to sustain savings and promote sustainable development.
According to Peter Hess (2010), the determinants of the adjusted net saving rate in developing economies highlight the importance of formalizing economic activities, which is essential for measuring financial deepening through the ratio of money supply to national income In contrast to developed countries, economic activity in developing nations often occurs within informal sectors, underscoring the need for formalization to enhance economic transparency and growth.
Adjusted net saving rates are directly influenced by natural resources, as income generated from the export of fuels, ores, and metals significantly contributes to a nation's savings The depletion of these natural resources leads to a decline in adjusted net savings, highlighting the importance of sustainable resource management for maintaining a country's financial health.
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 rate plays a crucial role in enhancing government revenues and public savings through export income generated from natural resources To estimate a nation's gross saving rate accurately, the same determinants are utilized, emphasizing the significance of resource exports and their impact on overall national savings Incorporating these factors aligns with SEO best practices by highlighting key terms such as "gross national saving rate," "export income," "natural resources," and "government revenues," ensuring the content is optimized for search engines.
SY =f ' (HDI, GYP, APL, FIN, XR) (2-4)
Between 2000 and 2006, the adjusted net saving rate (ASY) and the Human Development Index (HDI) serve as key indicators of a country's sustainable growth and overall human development The average growth rate of real GDP per capita (GYP) reflects economic performance during this period, while the average share of the population aged 15-64 (APL) indicates the working-age population's contribution to economic activity Additionally, the ratio of liquid liabilities to GDP (FIN) in 2000 provides insight into the financial sector's development and its potential influence on economic stability Together, these metrics offer a comprehensive overview of economic and social progress in that timeframe.
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
Foreign Direct Investment (FDI) as a share of GDP in 2000 is a key indicator for assessing economic openness and investment attractiveness Hess's research highlights that the Human Development Index (HDI), the proportion of the population in prime labor force age, the share of natural resources in exports, and financial development are significant factors influencing development outcomes Interestingly, economic growth alone did not emerge as a significant explanatory variable, emphasizing the importance of other developmental variables Additionally, gross national savings, changes in the share of the population aged 15-64, and the economic growth rate are identified as significant determinants of economic progress Incorporating these variables into analyses provides a comprehensive understanding of development dynamics and investment impacts.
Using the reduced form equation to estimate economic growth, Hess assumed that savings translate directly into investment, with savings and investment rates serving as indicators of physical capital formation This approach emphasizes the importance of savings in driving investment, which in turn influences overall economic development By focusing on physical capital accumulation, the method provides a simplified yet effective way to gauge a nation's economic growth potential based on observable savings and investment patterns.
Using adjusted net saving as an indicator of net capital formation provides insights into economic growth, although it partially accounts for human capital development and natural resource depletion The analysis incorporates key determinants such as the Human Development Index (HDI), Average Political Legitimacy (APL), real growth rate of goods and services exports, foreign direct investment (FDI), and the share of FDI in national output These factors are integrated into an equation to estimate the overall economic growth, highlighting the multifaceted nature of development measurement.
GYP=g( ASY OR GRS, HDI, APL, GX FDY) (2-5)
The analysis indicates that the savings rate does not have a statistically significant impact on the average annual change in real GDP per capita growth rate Conversely, APL and GX are identified as statistically significant variables influencing growth, whereas HDI and FDY do not serve as significant explanatory factors.
Dietz et al (2007) examined how resource abundance interacts with institutional quality, focusing on indicators such as lack of corruption, bureaucratic efficiency, and rule of law Building on Atkinson and Hamilton’s (2003) findings of a positive link between resource wealth and institutional quality on investment and savings, they investigated whether policy failures explain the negative impact of resource abundance on genuine savings Their reduced-form model, analyzing data from 115 countries over 18 years, highlighted that factors like per capita income, economic growth, age dependency, and urbanization significantly influence gross and adjusted net savings.
GrossSR i,t =α+β 1 lnY i,t +β 2 Growth i,t-1 +β 3 Age i,t +β 4 Urban i,t +β 5 Insti,t+β 6 Rsi,t+β 7 Inst i,t xRs i,t +T t +ε i,t (2-6)
GSR i,t =α+β 1 lnY i,t +β 2 Growth i,t-1 +β 3 Age i,t +β 4 Urban i,t +dβ 5 Insti,t+β 6 Rsi,t+β 7 Inst i,t xRs i,t +T t +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 age, urbanization, investment and resource rent They found that rich resource countries have lower genuine savings than poor resource countries and institution failure will depress genuine savings The negative effect of resource abundance on genuine savings will decrease when corruption reduces
2.7.2 Suggested model From main findings of Hess (2010) and Grace et al (2004), models for finding these answers about the relationship between economic growth with adjusted net savings with some determinants as GDPGR or GDPPC, HDI, MS AGE, UBGR and CPI are as follows:
Model 1: Faster growth of economics will lead to sustainable development ANS i =α 0 +α 1 GDPGR i +α 2 HDIi+α 3 MSi+α 4 XRi+α 5 AGEi+α 6 UBGRi+α 7 CPIi+ε i (2-8) Where i denotes for country i, ε is residual
Models 2: Wealthier economies will be more sustainable than poorer economies
ANS i =β 0 + β 1 Lg(GDPPC i )+ β 2 UBGRi+ β 3 AGEi+ β 4 XRi+ β 5 CPIi+μ i (2-9) Another findings of Dietz et al (2007) and Atkinson et al (2003) about the relationship between adjusted net savings and natural resources, they found the negative relationship between them so I set up two new models which relate to export of raw agricultural products and ores and metals as follows:
Model 3: Higher rate of agricultural export will be lessen sustainable development ANS i =γ 0 + γ 1 AGRI i + γ 2 UBGR i + γ 3 MS i + γ 4 XR i + γ 5 AGE i + γ 6 CPI i +ψ i (2-10)
Model 4: Higher rate of ores and metals export will be lessen sustainable development ANS i =δ 0 + δ 1 ONM i + δ 2 UBGR i + δ 3 MS i + δ 4 XR i + δ 5 AGE i + δ 6 CPI i +φ i (2-11) From the finding of Hess (2010), Hamilton et al (1999) about determinants which can affect to adjusted net savings in developing countries, I set up one more model as model 1 with data of developing countries only
Model 5: Faster growth of economics will lead to sustainable development in developing countries
This study presents an empirical model analyzing the impact of various economic and social indicators on a specific outcome The regression equation includes variables such as GDP growth rate (GDPGR), Human Development Index (HDI), magnitude of the stock market (MS), exchange rate (XR), age demographic (AGE), unemployment growth rate (UBGR), and consumer price index (CPI) The findings highlight the significance of these factors in influencing the target variable, providing insights for policymakers and researchers Additionally, the analysis underscores the importance of economic stability and development indicators in shaping societal progress and economic performance.
Where i denotes for country i, ε is residual Determinants that will be used for estimating models include:
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)
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ASY= adjusted net saving rate for 2000-2006
SY = average gross national saving rate for 2001–2006
The Human Development Index (HDI) for 2000 serves as a key indicator of a country's social and economic progress The average growth rate of real GDP per capita (GYP) reflects the economic expansion experienced during this period The proportion of the population aged 15-64 (APL) provides insight into the labor force size in 2000 and 2006, while the average annual change in this demographic (CPL) highlights shifts in the working-age population over time Together, these indicators offer a comprehensive overview of socio-economic development and demographic dynamics.
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 resource exports and financial development are key factors influencing economic growth However, the overall growth rate itself does not serve as a significant explanatory variable Additionally, gross national savings, the proportion of the population aged 15 to 64, and economic growth rate are important determinants shaping economic outcomes.
The analysis of the simultaneous model for economic growth and adjusted net saving reveals that the results are inconclusive Specifically, both savings-adjusted net saving and gross saving demonstrate statistically insignificant impacts on the average growth rate of real GDP per capita This suggests that neither metric serves as a reliable predictor of economic growth in this context.
2.8.2 Yacouba Gnegnè (2009) Yacouba (2009) tested whether adjusted net savings explains the change in the welfare over the period 1971-2000 Panel data included 36 developing and developed countries With proxies of a welfare are Human Development Index (HDI) and Infant Mortality Rate (IMR), he used Gross National Income (GNI) as a control variable and NNS is a regressor By using the fixed effect model for estimation this relationship, he found that adjusted net savings and welfare are positive significantly but the magnitude is weak
This study analyzes the relationship between genuine saving, corruption, and the resource curse using panel data from 115 countries over 18 years, sourced from the World Bank Employing various econometric techniques such as fixed effect estimation, GMM estimation, and a reduced-form model, the research provides comprehensive insights into how resource dependence and corruption impact long-term savings The findings highlight the significant influence of corruption and the resource curse on a nation's genuine savings, emphasizing the importance of good governance and sustainable resource management for economic stability and growth.
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+β 1 lnY i,t +β 2 Growth i,t-1 +β 3 Age i,t +β 4 Urban i,t +β 5 Insti,t+β 6 Rsi,t+β 7 Inst i,t xRs i,t +T t +ε i,t (2-16)
GSR i,t =α+β 1 lnY i,t +β 2 Growth i,t-1 +β 3 Age i,t +β 4 Urban i,t +β 5 Insti,t+β 6 Rsi,t+β 7 Inst i,t xRs i,t +T t +ε i,t (2-17)
Research indicates that resource-rich countries tend to have lower genuine saving rates compared to less resource-dependent nations Institutional failures and corruption further suppress genuine savings, highlighting the importance of strong governance Notably, reducing corruption can mitigate the negative impact of resource abundance on a country's genuine saving rate, promoting sustainable economic growth.
2.8.4 Alam et al., 2007 Their study measured the impact of economic growth on environment by using time series data in a period of 1971-2005 in Pakistan These factors in this study are GDP per capita, carbon dioxide emission, energy consumption, population and urbanization In their model, they use VAR model and ADF test They concluded that there is a positive relationship between economic growth and carbon dioxide emission in the long term In this case, economic development is energy driven so it contributes considerably to carbon dioxide emission
This paper explores the conceptual and empirical aspects of genuine savings, highlighting its significance for policy formulation Using the World Bank's genuine savings formula, the study provides insights into how this measure reflects a nation's sustainability and long-term economic health The findings emphasize the importance of genuine savings as a vital indicator for policymakers to assess whether a country is maintaining or depleting its overall wealth These insights support the integration of genuine savings into economic planning to promote sustainable development and informed decision-making.
GENSAV= (GDS-D p +EDU-R n,j -CO2damage)/GDP (2-18)
Where GENSAV is genuine domestic saving rates; GDS is gross domestic savings
Depreciation of physical capital (DP) reflects the wear and tear on infrastructure and equipment, impacting overall economic sustainability Current expenditure on education (EDU) is crucial for developing human capital and fostering long-term growth Rent from the depletion of natural capital (Rn,i) accounts for income generated from the extraction of resources such as energy, minerals, and forests, highlighting the financial benefits of natural resource use Additionally, damages caused by CO2 emissions (CO2 damage) represent environmental costs associated with carbon emissions, emphasizing the importance of accounting for environmental impacts in economic assessments.
His analysis revealed that the measure possesses both conceptual and empirical imperfections, leading to errors in policy implications derived from it These shortcomings highlight the limitations of relying on this measure for accurate policy decision-making, emphasizing the need for more precise and reliable metrics Addressing these issues is crucial to ensure that policy recommendations are based on sound and valid data.
From that, he suggested a global approach which need to find another sustainability issues, and natural capital is not corporate in national accounting
2.8.6 Lee et al., 2005 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 can affect to this index They found that environmental sustainability increases when income per capita increase, population declines and degree of civil and political liberty higher The ESI is a composite profile of national environmental stewardship based on a compilation of 21 indicators These are indicators for measure pollution of air and water quality, environmental sustainability such as biodiversity and ecosystem The fundamental measurement of environmental sustainability relate to the endowed environmental carrying capacity and the eco-efficiency These sources cannot change unless a society changes the way it produces and consumes It seems to be no direct relationship between the two in spite of a certain overlap between pollution measures and eco-efficiency related measures of environmental sustainability
2.8.7 Grace et al., 2004 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, also known as Adjusted Net Saving, is calculated by starting with Gross Domestic Savings and adjusting for several key factors It subtracts Consumption of Fixed Capital (Depreciation) to account for asset wear and tear, and adds Education Expenditure to support human capital development Additionally, it deducts environmental costs such as Air Pollution Cost, Water Pollution Cost, and CO2 Damage Costs, as well as Nonrenewable Natural Resource Depletion Costs, to provide a comprehensive measure of sustainable savings and long-term economic health.
(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
Genuine savings, GDP in 8095, GDP in 80, education, and investment are key variables analyzed in this study Using cross-sectional econometrics, the research reveals a significant negative relationship between natural resource abundance and the growth rate of GDP per capita This finding suggests that higher natural resource wealth may hinder economic growth, highlighting the importance of sustainable resource management for long-term development.
The resource curse hypothesis suggests that the inability of governments to manage large resource revenues sustainably can lead to economic stagnation Evidence indicates that countries experiencing slower growth often struggle with ineffective management of natural resources, macroeconomic policies, and public expenditures This mismanagement results in low genuine savings, which hampers long-term economic development Therefore, the resource curse may manifest not solely because of resource dependence but also due to poor policy frameworks that prevent sustainable growth.
Chapter remarks
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
Various models have been suggested to evaluate the impacts of economic growth on sustainable development, highlighting the complex relationship observed in both developed and developing countries Numerous studies indicate that a high economic growth rate can positively influence sustainable development Factors such as natural resources, institutional quality, age dependency ratio, urbanization, and human investment significantly affect sustainable development outcomes Understanding these relationships is crucial for creating effective policies that promote both economic growth and environmental sustainability.
Econometric techniques
on All specification errors of models such autocorrelation, heteroskedasticity, stability be tested as well at level of significance 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 (2SLS) estimation An instrumental variable, the Education and Literacy Foundation (ELF) index, will be employed for GDP growth or GDP per capita to mitigate reverse causality concerns, where income growth may influence savings The ELF index is designed to account for this potential reverse causality and is defined based on the proportion of the population belonging to different ethno-linguistic groups, specifically considering the number of people in each group, the total population, and the total number of ethno-linguistic groups in the country.
The ethno-linguistic fractionalization (ELF) index measures the likelihood that two randomly selected individuals from a country belong to the same ethno-linguistic group, with higher ELF indicating greater societal fragmentation Mauro (1995) found that increased ethnic fractionalization is associated with higher corruption levels, which in turn reduce investment and hinder economic growth His study employed robust tests, using the ethno-linguistic fractionalization index as an instrument to control for endogeneity, thereby strengthening the validity of the link between ethnic diversity, corruption, and economic performance.
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 study employs ELF as an instrumental variable to address endogeneity concerns, assuming that ELF influences GDP growth without directly impacting adjusted net savings An over-identification test is conducted to validate this approach, with the null hypothesis stating that ELF affects adjusted net savings solely through its impact on GDP growth This methodology helps ensure the robustness of the causal relationship between ELF, GDP growth, and sustainable savings.
Model 1: Faster growth of economics will lead to sustainable development ANS i =α 0 +α 1 GDPGR i +α 2 HDIi+α 3 MSi+α 4 XRi+α 5 AGEi+α 6 UBGRi+α 7 CPIi+ε i (3-1) Where i denotes for country i, ε is residual
Null hypothesis H 0 : there is no relationship between adjusted net saving and average GDP growth in period 1996-2010
Alternative hypothesis H a : there is a between adjusted net saving and average GDP growth in period 1996-2010
If α 1 >0: there is a positive relationship between adjusted net savings and GDP growth
If α 1 0: there is a positive relationship between adjusted net savings and income per capita
If β 1 0: there is a positive relationship between adjusted net savings and export of agricultural products
If γ 1 0: there is a positive relationship between adjusted net savings and export of ores and metals
If δ 1 0: there is a positive relationship between adjusted net savings and economic growth in developing countries
If α 1