Socio-economic, environmental and institutional sustainability and economic growth within BRICS: what are the best policy options?
Awolusi, Olawumi Dele.
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Due to diverse socio-economic, environmental, institutional characteristics and different levels of industrial development, a major problem in BRICS (Brazil, Russia, India, China, and South Africa) countries is how bloc member countries can work together to advance the goals of economic growth without compromising individual member countries aspirations to sustainability. For BRICS cooperation to bring about improved welfare in individual countries, economic growth in the bloc needs to be conducive to sustainability in individual countries. Otherwise, policies need to be enacted to ensure sustainability in the bloc. The formulation of policy options would require extensive knowledge of how economic growth relates to identified sustainability variables. Consequently, the overall objective of this thesis is: To examine the effect of economic growth on socio-economic, institutional, and environmental sustainability within the BRICS as well as compare evidence on relationships between economic growth and sustainable developments within the BRICS bloc. To accomplish the stated objective, the thesis used various non-linear and linear estimators that are robust to both small sample size bias and cross-sectional dependence errors, contrary to most literature on the topic. The overall argument of the thesis was supported by four different pieces of analysis, each contained in a publishable paper. The first article (chapter 3) titled "Socio-economic sustainability and economic growth in BRICS: relationships and policy options" investigates the influence of economic growth on socio-economic sustainability in BRICS to observe possible patterns in this bloc. The paper uses Pesaran et al. (2001) autoregressive distributed lag (ARDL) co-integration technique, as well as, Toda and Yamamoto (1995) granger non-causality approach in a two-variable vector autoregression model. In this paper, the results established the existence of co-integrating vectors and short-run causal relationships, which run either unidirectionally or bidirectionally in all the variables. Our study, therefore, concluded that the long-run equilibrium relationships between economic growth and socioeconomic sustainability in BRICS vary from one country to another, but were largely insignificant in the models of Russia and China during the study period. This conclusion is tacit support for the Kuznets hypothesis in both China and Russia. The study concluded that a common policy option was not possible and that for the block to pursue its economic prosperity goals without compromising individual countries' needs for socio-economic sustainability, varied radical policy options were inevitable in Brazil, India, and South Africa. These include radical law reforms and independent organisations; population growth control, speedy poverty alleviation and basic education; market development; and creation of societal culture to promote socio-economic sustainability. Article 2, titled "Economic growth and institutional sustainability nexus within BRICS: Relationships and policy options" in Chapter 4 of the thesis examines the influence of economic growth on institutional sustainability within BRICS. The paper adopted a panel data cointegration analysis and Hausman specification test. As a robustness check, the study launched the Fully Modified Ordinary Least Squares (FMOLS) and Dynamic Ordinary Least Squares (DOLS) estimations at individual and panel levels over the study period. The study concluded that the effect of economic growth on institutional fitness within BRICS, though significant and positive, was limited and varied. Specifically, the study observed that China performed well among the five countries. Consequently, this study posited a more radical policy mix to enhance institutional sustainability in the three (Brazil, India, and South Africa) less developed countries in the bloc. The policies could focus more on developing radical institutional strategies; superior growth induced domestic investment, financial developments, and circular economic model. vi Article 3 in Chapter 5 of the thesis, titled “Economic growth and environmental sustainability within BRICS countries: A comparative analysis " focused on the influence of economic growth on environmental sustainability within BRICS. Due to the probable crosssectional dependency errors, the estimates via the autoregressive distributed lag (ARDL) were supported by cross-sectional autoregressive distributed lag (CS-ARDL). The results confirm that economic growth and environmental sustainability are co-integrated at the panel level. Specifically, the study concluded that GDP growth exhibits a significant negative impact on C02 emissions in the short-run but reversed in the long-run, tacit support for the Environmental Kuznets Curve (EKC) hypothesis as supported by both the neoclassical and the new growth theories. The study, therefore, recommended policies to improve green economic growth, the nature of technology usage, energy consumption, and institutional fitness to achieve healthy environmental sustainability in BRICS. Article 4, Chapter 6, titled Economic growth and sustainable developments within the BRICS, MINT and G-7 countries: A comparative panel data analysis focused on the effect of economic growth on sustainable developments within the BRICS, MINT and G-7 countries, in an attempt to compare evidence, since differing levels of industrial development might mean different concerns about sustainability issues. The estimates via the autoregressive distributed lag (ARDL) were supported by cross-sectional autoregressive distributed lag (CS-ARDL) and crosssectional distributed lag (CS-DL). The results confirm that economic growth increases the level of sustainable developments in all BRICS countries in the short-run, but constitutes a drag on sustainable development in the BRICS sub-sample 1 (Brazil, India and South Africa) countries in the long-run. Consequently, this study recommended a more radical policy mix to reduce the negative impact of economic growth on the level of sustainable development in Brazil, India, and South Africa. These policies should take the form of focused, sustainable development strategies and energy policies, the creation of a new economy, and improved education. Overall, the validation of the Kuznets hypothesis in the relationship between economic growth and socio-economic sustainability in the BRICS bloc, as attested by the empirical validation of a probable EKC argument, depicted the necessity for a more radical sustainability policy mix by in three vulnerable countries (Brazil, India and South Africa). When compared with the two more advanced countries (China and Russia) for the more desired goal of sustainable economic growth to be realized, the outcomes were different. To the best of our knowledge, this is the first comprehensive study to analyses the effect of economic growth on sustainability to devise possible policy options that would take care of priority needs of individual countries (or subgroup of countries) in aspects of socio-economic, environmental and institutional sustainability in the BRICS bloc. Again, contrary to the practice in the literature, the study corrected for cross-sectional dependence. The study also addressed endogeneity issues in both linear and non-linear frameworks. Our results conform to all robustness checks, including temporal and spatial changes. The novelty of this thesis also rests on the provision of novel crossvalidation of estimation techniques, as well as the construction of socio-economic, institutional fitness, financial development, and sustainable development indices that are robust to small sample bias and cross-sectional dependence issues.