The ecological poverty trap: Addressing the role of structural change, economic growth, trade, capital formation and democracy

Despite the longstanding empirical works and policy recommendations on climate change, the world has continued to dwell within an ecological deficit since the early 1970s. This study investigates the direct and indirect effects of some macroeconomic indicators on ecological poverty. To achieve this goal, the study proposes a new approach to measuring ecological poverty by computing the difference between ecological footprint and biocapacity. The panel data estimators such as the dynamic ordinary least square (DOLS) and the Driscoll and Kraay fixed effect (DKFE) are employed from 1995 to 2017 to yield consistent estimations. Empirical outcomes document that, a U-shaped relationship is observed between GDP per capita and ecological poverty. Also, domestic investment, trade openness, agriculture value added, service value added and democracy reduces ecological poverty by enhancing nature's supply to mankind. However, FDI and manufacturing value added are observed to worsen the current stakes of ecological poverty in the world. Value added in manufacturing, services and agriculture are suitable transmission mechanisms through which FDI, GDP per capita, domestic investment, trade openness and democracy affect ecological poverty. Policy recommendations are equally discussed.