Causality Analysis between Poverty and Environment: A case Study of Pakistan’s Coastal Belt

The current study explores the impact of poverty on environmental degradation and impact of environment on poverty in the Coastal Belt of Pakistan. The poverty is measured by using headcount ratio measure. While environmental proxies used in this study are fossil fuel energy consumption from fossil fuel (FFEC), combustible waste and renewable (CRW) and carbon dioxide emission from the use of liquid fuel (CELF). The study indicates a strong long-run correlation between poverty and environmental degradation. This relationship has been investigated by using Augmented Dicky-Fuller, co-integration as well as Granger causality tests. Pakistan’s secondary data from 1971 to 2018 on poverty and environmental variables have been used for the analysis purpose. The results of the study indicate that poverty contributes to the environmental degradation and results in lowering the pace of economic growth and development. Moreover, environmental degradation also is a cause of poverty and may affect economic development adversely. The present study predicts the evidence of a bi-directional relationship between environmental factors and poverty in Pakistan.