Transformative pathways to sustainable wealth: Do natural and human capital really matter?

Abstract

In the quest for global prosperity, macro-environmental economists are emphasizing the shift towards sustainable wealth, a framework that harmonizes environmental sustainability with economic well-being. Our research contributes significantly to this field by examining the influence of human and natural capital on sustainable wealth in seven emerging economies (E−7) from 1998 to 2022. We utilized advanced methodologies including second-generation unit-root and cointegration techniques and a novel Cross-Sectional Auto Regressive Distributive Lag (CS-ARDL) approach to empirically analyze the results. Our study involved nine different models, each incorporating various combinations of natural and human capital. The results indicate that renewable natural capital and both male and female human capital positively affect sustainable wealth, whereas non-renewable natural capital has a detrimental impact. More importantly, our finding shows that over-reliance on non-renewable resources not only diminishes sustainable wealth but also attenuates the influence of other variables, such as human capital, on its creation. Conversely, dependence on renewable resources enhances sustainable wealth and strengthens its impact. Drawing on these insights, we strongly recommend that policymakers prioritize investments in both renewable natural capital and human capital. Such strategic investments are crucial for catalysing long-term sustainable economic growth and prosperity. By fostering environments that enhance the contributions of renewable resources and human potential, nations can secure a more sustainable and prosperous future, effectively navigating the challenges of modern economic landscapes.