Does environmental stress affect economic growth: evidence from the Gulf Cooperation Council countries?

Abstract

The current paper empirically investigates the effect of environmental stress on economic growth in the Gulf Cooperation Council countries during 1995–2016. A panel cointegration analysis, specifically an autoregressive distributed lag model, is used to achieve the paper’s goal. The present work is motivated by the high carbon dioxide emissions per capita and environmental stress in these countries relative to other countries, and it assumes that the income per capita is a function of the natural resource’s rents and environmental stress. The findings show that environmental stress enhances economic growth, mainly in the long run. At the same time, the natural resources’ rents improve it in the short run and impede it in the long run. These results are significant because they tell that the Gulf Cooperation Council countries’ environmental stress did not reach critical levels that produce vast negative influences on the economy, and the resource curse hypothesis is valid in the long run. The current study’s policy implication states that economic policymakers should monitor and evaluate future environmental stress outcomes in these countries. There is no guarantee that the positive influence prevails. Therefore, the Gulf Cooperation Council countries should adopt genuine procedures to diversify their economies. Besides, it should continue its initial steps to expand renewable energy resources, i.e., nuclear, wind, and solar.Graphic abstract