Does environmental degradation matter for poverty? Clarifying the nexus between FDI, environmental degradation, renewable energy, education, and poverty in Morocco and Tunisia

Abstract

Poverty is the curse for sustainable and equitable development worldwide by detreating environmental sustainability, economic instability, and inequality. However, as a remedy for poverty reduction, researchers over the past decade have examined the key macro determinants and established positive associations, implying the contributory role in poverty reduction. The study explores the environmental, energy, education, and foreign direct investment (FDI) effects on poverty reduction in Morocco and Tunisia from 1991 to 2020. We employed autoregressive distributed lagged (ARDL) and nonlinear ARDL frameworks to document the explanatory variables' elasticity on poverty reduction in both the long- and short-run horizons. According to linear assessment, the study documented that education, energy, and FDI support poverty reduction. At the same time, the cost of environmental degradation has a detrimental effect on poverty augmentation. Referring to asymmetric assessment, the study established a long-run asymmetric association between asymmetric shocks of education, FDI, and energy with poverty. For directional association, the study has implemented a casualty test with the Fourier TY causality test and revealed a bidirectional association between education and poverty, and energy and poverty. Moreover, the unidirectional casualty was unveiled between FDI and poverty, and poverty and environment.

Keywords: Augmented ARDL; Education; Environmental degradation; FDI; Fourier TY causality; NARDL; Poverty.