Abstract
As economic growth may reach a point where further socio-economic development is not sustainable due to continual environmental degradation having negative development impact, the paper proposes a methodology for determining global central tendency for the saturation point of economic growth in its impact on sustainable development. The theoretical framework adopts a modified classical growth model, where economic growth is considered a means towards development, just as capital stock constitutes a means towards economic growth. In such a model, the impact of economic growth on sustainable development exhibits diminishing “marginal social productivityâ€, until development reaches a stationary state, where the impact of growth reaches its climax and any further growth will bring a decline on the level of development. Economic growth is measured by per capita income while selected development indicators measure development. The factors responsible for the diminishing “marginal social productivity†of economic growth are population growth and depreciation rates of capital stock and physical environment. For empirical investigation, econometric studies explored the dependence of various development indicators on per capita income (US$ PPP) for 99 countries, with a-priori expectation that the development indicators will progress with economic growth at a decreasing rate and reach saturation point. The results revealed that the saturation point or ultimate level of sustainable development is attained at per capita income of $36,400 500 (PPP), a level exceeded by 13 percent of the countries. Results also showed that environmental degradation is both a causal factor and consequence of contemporary growth.
Highlights
Socio-economic development requires economic growth while the adverse cumulative effect of continual economic growth on the environment may get to a critical point with severe consequences to the wellbeing of the people and the sustainability of development, it will be helpful to development policy to investigate the point at which economic growth as a means towards development reaches the limit of its capacity of impact on development
Data Sources and Sample Size: Data used for the empirical analysis in respect of Human Development Index, Gross National Income per capita (US$ 2005, purchasing power parity (PPP)), Life Expectancy, Child Mortality, Percentage of population below Poverty Line of US$1.25, Percentage of Household with Access to Safe Water, Percentage of population that are under-nourished are sourced from UNDP and World Bank statistical publications
The saturation points for equation (4) and (6) where dY/dX = 0, which we interpret as stationary states for sustainable development are given respectively as: 1. X* b / 2c
Summary
Socio-economic development requires economic growth while the adverse cumulative effect of continual economic growth on the environment may get to a critical point with severe consequences to the wellbeing of the people and the sustainability of development, it will be helpful to development policy to investigate the point at which economic growth as a means towards development reaches the limit of its capacity of impact on development. The concept of sustainable development adopted here is an empirical one, which is currently defined by the point at which economic growth can no longer contribute to socio-economic development In other words, this concept refers to an environmental “steady state” for the economy, where the state of the environment will not degenerate beyond the tolerable mean global standards. The marginal net social benefit of growth becomes zero when, empirically, economic growth reaches a saturation point where it ceases to have any positive impact on development indicators. Our position by contrast is simple and straightforward in the sense that we attempt to investigate the limits to the effectiveness of growth in promoting socio-economic development in a global country cross-section study This position is consistent with the Sen’s (1985) functionality of income as applicable to individual nations and at various levels of economic growth.
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