Accepted Manuscript

Renewable energy consumption, economic growth and human development index in

Pakistan: Evidence form simultaneous equation model

Zhaohua Wang, Danish, Bin Zhang, Bo Wang

PII: S0959-6526(18)30592-4
DOI: 10.1016/j.jclepro.2018.02.260
Reference: JCLP 12207

To appear in: Journal of Cleaner Production

Received Date: 29 May 2017

Revised Date: 1 February 2018
Accepted Date: 23 February 2018

Please cite this article as: Wang Z, Danish , Zhang B, Wang B, Renewable energy consumption,
economic growth and human development index in Pakistan: Evidence form simultaneous equation
model, Journal of Cleaner Production (2018), doi: 10.1016/j.jclepro.2018.02.260.

This is a PDF file of an unedited manuscript that has been accepted for publication. As a service to
our customers we are providing this early version of the manuscript. The manuscript will undergo
copyediting, typesetting, and review of the resulting proof before it is published in its final form. Please
note that during the production process errors may be discovered which could affect the content, and all
legal disclaimers that apply to the journal pertain.
 ACCEPTED MANUSCRIPT
Renewable Energy Consumption, Economic Growth and Human Development Index in
Pakistan: Evidence form Simultaneous Equation Model

Zhaohua Wang a,b,c,d, Danisha,b, Bin Zhang a,b,c,d, Bo Wang a b*

a
School of Management and Economics, Beijing Institute of Technology, 100081 Beijing, China
b
Center for Energy & Environmental Policy Research, Beijing Institute of Technology, 100081 Beijing,
China
c
Collaborative Innovation Center of Electric Vehicles in Beijing, 100081 Beijing, China

PT
d
Beijing Key Lab of Energy Economics and Environmental Management, Beijing 100081, China

RI
Abstract

SC
The major consumption of energy around the globe is related to human activities. However, it

may be essential to quantify how renewable energy consumption influence process of human

U
development. This particular area of research still needs to be explored. Thus, this paper
AN
explores the relationship between renewable energy consumption, economic growth and

human development index for 1990-2014 in Pakistan by using Two-Stage Least Square
M

(2SLS) method. Empirical results reveal that renewable energy consumption does not
D

improve the situation of the human development process in Pakistan. More, interestingly
TE

higher the income of the country the lower is level of human development. In addition, the

CO2 emission is helpful to improve human development index. Furthermore, trade openness
EP

discourages human development process in Pakistan. Furthermore, causality analysis

confirms feedback hypothesis between environmental factor and human development process
C

in the long run path. These novel findings would help policymaker and government officials
AC

to better understand the role of renewable energy and economic growth in the human

development process in Pakistan.

Keywords: Renewable Energy; Economic growth; Human Development Index (HDI); 2SLS;

Pakistan

*
Corresponding author at: School of Management and Economics, Beijing Institute of Technology, Beijing 100081, China.
Tel.:+ 861068918213; fax: +86 10 68912483 E-mail address: 51022080@qq.com (Bo Wang)
1
 ACCEPTED MANUSCRIPT
1. Introduction

Energy is considered as backbone of economic development and social well-being,

whereas renewable form of energy is an essential to secure future of climate change. The role

of energy has always been considered as a traditional factor of production. Not only

production depends on energy, but it is also imperative for sustainable economic growth

PT
which can only be possible with a sufficient and sustained supply of energy. Modern forms of

energy are an essential input for attaining Millennium Development Goals (MDGs). Energy

RI
plays a key role in creating jobs, agriculture, transport, commerce and economic

SC
development. Energy is also a major device for eliminating poverty and sustaining human

development and all forms of energy contribute to economic growth (Karekezi et al., 2012).

U
Over the past century increasing energy consumption has considered the key element in the
AN
process of industrialization and economic development (Warr and Ayres, 2010). There

remains the strong relationship between energy consumption and economic growth. Energy
M

plays a significant role to boost the economy of any country. The developed nations switch
D

from conventional energy consumption, (e.g., burning of coal, gas, and Oil) to renewable
TE

energy sources to tackle the future consequences of energy. The nexus between energy

consumption and economic growth have widely been investigated (Alper and Oguz, 2016;
EP

Dogan 2016; Inglesi-Lotz 2015; Kahia et al. 2016; Kocak and Sarkgunesi 2017; Rafindadi

and Ozturk 2016).

C

However, beyond the effect of energy on economic growth, it also affects human well-
AC

being. For instance, there is a direct relationship between the existence of energy services and

availability of modern health facilities, education, and communication. The lack of energy

services are indications of poor health facilities, few opportunities for education and

development, and little potential of the population against poverty (Ouedraogo, 2013).

Energy consumption is an important indicator that reflects the level of social development.

For the process of modernization, it is essential to generate an adequate amount of energy to

2
 ACCEPTED MANUSCRIPT
advance sustainable development (Niu et al., 2013). Renewable energy improves the local

economies, and it is a driver for human development in rural areas (OECD 2012). Also, low

human developed countries can achieve higher development through breaking the vicious

cycle of underdevelopment. For instance, renewable energy production can trigger the

economic development and make these countries able to reach higher human development

PT
levels (Kazar and Kazar 2014). Highly humanly developed countries are consuming much of

their resources to produce renewable energy instead of devoting resources to non-renewable

RI
sources for a long period. Also, economic growth is a crucial factor to reduce poverty and

SC
create more resources which is essential for human development (Morley and Abdullah,

2104). Knowing the importance of renewable energy consumption for human development

U
process motivate us to examine the linkage between renewable energy consumption,
AN
economic growth and human development to quantify how renewable energy consumption

influence process of human development in Pakistan. Therefore the innovative contribution

M

of this study is to investigate the relationship between renewable energy consumption,

D

economic growth and human development index incorporating trade ration, urbanization, and
TE

CO2 emission in the context of Pakistan.

What makes Pakistan as our case study is interesting. The situation of the human
EP

development process in Pakistan is vulnerable, and it is ranked as 146th among 186 countries

and territories of the world in term of human development index (HDI). Furthermore, 49.4
C

percent of Pakistan’s population is suffering from multiple deprivations and 11.0% at the
AC

vulnerable situation. Second, the indicators of Gender inequality index (GII) are also not

satisfactory. The value of gender inequality of Pakistan is 0.567 which places Pakistan at a

123rd position out of 146 countries in the world (Term et al. 2013). The value of HDI for

Pakistan has been observed stagnant over last five years. The main contributors to slow

growth in human development are educational inequality and rising or stagnating income at

the global level. The HDI figure of Pakistan was 0.537 in 2013 which were among lowest
3
 ACCEPTED MANUSCRIPT
indexed category, and that placed the country at 146th position out of 187 countries and

territories of the world. Third, Pakistan’s economy is also facing many challenges in the form

of terrorism, extremism and energy crises. A massive cost is incurring to deal with all these

challenges which not only harm the poor, children, elders and women but it also effects

crisis-affected population, disables, refugees and temporarily relocated persons. The

PT
pressures of damaging habitat, the trauma of displacement, loss of livelihoods, and

disillusionment enhance these pressures manifold. Pakistan ranked among top 10 vulnerable

RI
countries of the world to the impact of climate change, and cost of adaptation is estimated at

SC
$10.7 billion per year for next 40-50 years (UNDP 2014). The current situation of energy in

Pakistan is at vulnerable and energy crisis in the country is affecting every sector of the

economy and human life.

U
AN
This study contributes to the existing body of knowledge in several ways. First, this paper

is as a first innovative contribution to existing literature, which quantifies the relationship

M

between renewable energy consumption, economic growth and human development process,
D

as it is evident that energy consumption, economic growth, and human development are
TE

interrelated. The large amount studies have examined the impact of renewable and non-

renewable energy on growth but not addressed efficiently. The major consumption of energy
EP

around the globe is related to human activities. This particular area of research still needs to

be explored. However, it may be essential to quantify the relationship between energy

C

consumption and HDI. It is evident that to examine the link of HDI with renewable energy
AC

consumption and economic growth is originality and novelty of this research study in the

field of energy.

Second, this study is the first attempt to investigate the relationship between renewable

energy consumption, economic growth and human development index in Pakistan specific

scenario in explaining the human development process. The current situation of energy and

human development process in Pakistan is at vulnerable and energy crisis in the country is
4
 ACCEPTED MANUSCRIPT
affecting every sector of the economy and human life. Pakistan is abundant in natural

resource, and there are opportunities for investors to utilize renewable energy resources. It

needs not to be emphasized that Pakistan is not poor but poor management of its natural

resources has made it so. Thus it is need of time to control the worst situation of both energy

and human development process in Pakistan. About 38% populations have no access to

PT
electricity. The poor condition of electricity suffers education, health, and income of the

people. This study is an attempt to contribute to the existing literature and helps policymaker

RI
to better understand the role of renewable energy in the human development process of

SC
Pakistan. To analyze the time series data for Pakistan two stages least square (2SLS) method

is used. Before 2SLS we have checked the stationary level of the data. After the regression

U
estimate, we have detected the causal relationship among variable of consideration.
AN
The rest of the study designed as section 2 gives an overview of human development

index and energy situation in Pakistan. Section 3 explains literature review and section 4
M

describes the methodology and data source. Section 5 explains results analysis and
D

discussion, and lastly, section 6 concludes the study.

TE

2. Overview of Human Development Index and Energy in Pakistan

EP

The development efforts by Government of Pakistan consolidate on millennium

development goals (MDGs). Specifically, the MDGs contain two important macroeconomics
C

frameworks, i.e., new growth framework and poverty strategy paper (PRSP). The new
AC

growth framework is a framework for inclusive growth and increasing total factor

productivity whereas, poverty reduction strategy paper (PRSP) focuses on social and

economic policies. HDI measures the level of human development of any country and allows

cross-country comparison, divide countries into three levels of development, i.e., developed,

under developing, or underdeveloped (Hou et al., 2014). United Nations Development

program is regularly issuing an annual review on HDI for more than two decades. These

5
 ACCEPTED MANUSCRIPT
problems depict the quality of life for people around the world. The value of HDI for

Pakistan has been observed stagnant over last five years (UNDP, 2014).

The electricity mix of Pakistan heavily depends on thermal power that contains 35.2% of

total electricity share. Renewable energy is a quick way to handle current energy crises and

pledges energy security. About 70% of the population in the country is living in a rural area

PT
which contains 7 million households. It is estimated that 54% of rural population is living

without electricity. This deprivation has forced them to lead a sub-standard life of poverty

RI
and social inequity. As a result, a lot of resources and workforce cannot be utilized for

SC
economic development due to disengagement from the mainstream (Raheem et al. 2016).

In Pakistan, energy consumption has raised up to 80 percent similar to other developing

U
nation for last two decades. The TOE has increased to 61million in 2009-2010 which was 34
AN
million in 1994-1995. Pakistan mostly depends on conventional energy to meet energy

requirement in the country. Abundant renewable energy resources are available in the
M

country. There exists the potential for almost all kind of renewable energy, include, i.e., the
D

wind, solar, biodiesel production, geothermal, biomass waste to energy production,

TE

tidal/ocean energies and micro hydel/canal fall (Sheikh, 2010). A Rich source for production

of wind energy is available in Pakistan. It is projected that cost line zone has the potential to
EP

produce energy of 50,000MW. The Northern area in the country designed for the production

of wind energy in the country. To operational wind energy, about 5000 villages can be
C

electrified. Punjab has the potency to produce energy 350MW from its Canal system. Micro-
AC

power plants in the country can yield energy about 300MW. Due to an agrarian economy of

Pakistan, cheap energy is required to its rural population (Shahbaz et al., 2015). The trend of

human development index, renewable energy consumption and environmental factor can be

observed in figure 1.

6
 ACCEPTED MANUSCRIPT
Human Development Index, renewable energy and CO2 emisson of Pakistan
1.2

0.8

0.6

PT
0.4

0.2

RI
0

SC
Human Development Index CO2 emission Per Capita Renewable Energy Per Capita

U
Figure 1: Trends in human development index, CO2 emission per capita and renewable energy consumption of Pakistan
AN
3. Brief Literature Review
M

This section provides a detailed review of previous studies. In the first part, we provide

the literature about the relationship between renewable energy consumption and economic
D

growth. Next, we review the previous studies about economic growth and human
TE

development index. Finally, we review the literature regarding the nexuses between
EP

renewable energy consumption and human development index.

3.1. Renewable energy consumption and Economic growth

C

Prior studies have examined the nexus between renewable energy consumption and
AC

economic growth. Two schools of thoughts are developed regarding the nexus between

renewable energy consumption and economic growth. One school of thoughts found a long-

run relationship between renewable energy consumption and economic growth. Likewise,

Shahbaz et al. (2015) found that renewable energy consumption enhances economic growth

in Pakistan. Furthermore, labor and capital also play an important role in economic growth.

Ewing et al. (2007) report the nominal relationship between renewable energy consumption

7
 ACCEPTED MANUSCRIPT
and economic growth for the United States. Empirical results suggest that high shocks in

energy influence economic growth. On the contrary, Tiwari (2011) examine that renewable

energy added much to economic growth in case of India and proposed that contribution of

renewable energy in total energy balance must increase over time. Also, Arifin and

Syahruddin (2011) conclude that economic growth is augmented by adopting energy

PT
conservation policies. The results also confirm growth hypothesis for Indonesia. Ocal and

Aslan (2013) conclude that renewable energy consumption contributes negatively to

RI
economic growth in case of Turkey. Another group of researchers studied causal relationship

SC
between renewable energy consumption and economic growth. For instance, Bowden and

Payne (2010) focus on the causal relationship between economic growth and renewable/ non-

U
renewable energy consumption for the US using Toda-Yamamoto long-run causality
AN
approach. Bhattacharya et al. (2016) confirm the long run relationship between renewable

energy consumption and economic growth over the period of 1991-2012 for 38 high energy
M

consuming countries. Menegaki (2011) and Alper and Oguz, (2016) examine the causal
D

relationship between renewable energy consumption and economic growth for EU-27 and
TE

new EU member countries respectively. The result of the study has confirmed neutrality

hypothesis. Also, Menyah and Wolde-Rufael (2010) investigate the causal relationship
EP

between CO2 emissions, economic growth, nuclear and renewable energy consumption. In

the same way, Sadorsky (2009) establish bi-directional causality between renewable energy
C

consumption and economic growth for 18 emerging economies. Sebri and Ben-Salha (2014)
AC

use the multivariate framework to probe the causal relationship between renewable energy

consumption and economic growth over the time span of 1971–2010 for the BRICS

countries. Results of the study confirm the long-run relationship between renewable energy

consumption and economic growth. Also, Saidi and Ben Mbarek (2016) found that

unidirectional causality is running from renewable energy consumption to real GDP per

capita in the case of developing countries. Lin and Moubarak (2014) confirm bi-directional
8
 ACCEPTED MANUSCRIPT
causality between economic growth and renewable energy consumption in China. Similarly,

for G7 countries Chang et al. (2015) prob the effect of renewable energy consumption on

economic growth. The empirical results affirmed bi-directional causality between the

variables.

3.2. Economic growth and Human Development Index (HDI)

PT
The outline of HDI gained prevalent attention, which reveals general disappointment by

the probable real per capita GDP or real wages a quantity of changes in living standards. The

RI
HDI is addressed by way of change as it reached out past buying the force of private incomes

SC
to incorporate measurement of prosperity and personal satisfaction. Furthermore, since per

capita GDP and additional components of HDI, life expectancy, and educational achievement

U
have for the most part progressed at different rates this permits a country to assess its
AN
economic development in various formative stages (Hou et al., 2014). Through two-way

linkage, it has been studied the relationship between HDI and economic growth. The results
M

of the study have found that human development has an impact on economic growth, which
D

will strengthen the range of choices capabilities of masses of a country, economic growth
TE

will improve human development (Ranis, 2004). In the case of India, Khodabakhshi (2011)

found that growth has a low impact on HDI although growth is rising well. Costantini and
EP

Monni (2008) analyzed the relationship between economic growth, sustainability and human

development for 179 countries and forced that complimentary goal could be the achievement
C

of high living standard in the developing countries for human capital accumulation. The
AC

progress of human development plays an important role to build a sustainable development

path. Also, Neelankavil et al. (2012) investigate that fiscal and monetary policy, exports and

education rather than foreign direct investment, contribute positively to economic growth. In

case panel of 72 countries, Hafner and Mayer-Foulkes (2013) found that relationship between

human development and income is statistically not significant.

9
 ACCEPTED MANUSCRIPT
3.3. Renewable energy consumption and Human Development Index (HDI)

Little attention has given to the link between renewable energy consumption and human

development index. For instance, Pîrlogea (2012) estimate the effect of fossil fuels and

renewable energy on the human development process. Results of the study reveal that fossil

fuel negatively affects human development and renewable energy has a significant positive

PT
impact on human development. Kazar and Kazar (2014) examine the nexus between

renewable energy consumption and human development over the period 1980-2010. The

RI
finding suggests bidirectional causality between human development and renewable energy

SC
consumption. Morley and Abdullah (2014) found that high human developed countries are

consuming much of their resources to produce renewable energy instead of devoting

U
nonrenewable sources for a long period. Also, (Ouedraogo, 2013) conclude that electricity
AN
consumption has a negative impact on the human development process, which implies that

higher consumption of electricity lowers the human development index. Recently, Sinha and
M

Sen (2016) found a causal relationship between economic growth, CO2 emission, trade
D

volume, and human development indicator for (BRIC countries) during 1980-2013.
TE

Empirical findings have supported feedback hypothesis between CO2 emissions and human

development, trade volume and human development, economic growth, and human
EP

development, and CO2 emissions and trade volume.

To sum up the literature, it is evident that energy consumption, economic growth, and
C

human development are interrelated. The relationship between renewable and non-renewable
AC

energy and economic growth is largely overlooked but not addressed efficiently. The major

consumption of energy around the globe is related to human activities. The literature suggests

that renewable energy is a key factor to boost up economic growth. Also, from the literature,

it has been perceived that economic growth and renewable energy may help to reduce

poverty and can improve human development index. Further, only few studies examine the

link between renewable energy consumption and human development. However, these
10
 ACCEPTED MANUSCRIPT
studies could not make consensus whether higher energy consumption improves or worsen

the human development process. Nevertheless, the research in this particular area is scared,

as none of the studies refers the role of renewable energy consumption and economic growth

in the human development process. This particular area of research still needs to be explored.

However, it is essential to quantify the relationship between renewable energy consumption

PT
and HDI. Thus, the novelty of the present study is to investigate the relationship between

renewable energy consumption, economic growth and HDI incorporating urbanization,

RI
environmental factor, and trade ratio as control variables to avoid speciation bias.

SC
4. Data Source, Model Specification, and econometric methodology

4.1. Data Source and variable description

U
The data for this study is extracted from world development indicator as the website of
AN
World Bank, BP statistical review and world resource institute from 1990-2014. The human

development process is measured as the value of HDI and data is extracted from Human
M

Development Report (World Bank, 2015). Renewable energy consumption is measured as

D

renewable energy (a proxy of the wind, hydro and solar energy), the data is collected from
TE

the website of Statistical review (BP Statistical Review, 2015). Urbanization is calculated as

the growth rate of urban population. Trade ratio is measured as the sum of the total of import
EP

and export of goods and services (% of GDP). The data for urbanization and trade ratio is

collected from World Development Indicator (WDI). CO2 emission is used to measured
C

environmental condition, which is calculated as CO2 emission per capita and the data is
AC

extracted from world Resource Institute (WRI, 2015). The summary of symbols, definition,

measure and data source of the variable are shown table 1.

11
 ACCEPTED MANUSCRIPT

Table 1:
Variable symbols, definition, measure and Data source
Variable Symbol Definition Measure Data source
This includes CO2 emissions that stem from the burning of fossil fuels and the

PT
Carbon dioxide emission CO2 manufacturing of cement. It includes CO2 produced during the consumption of In metric tons per capita WRI, 2015
solid, liquid, and gas fuels and gas flaring.

RI
Economic growth GDP Economic growth in measure in US dollar per capita (constant 2005 Us Dollar) US Dollar World Bank 2015
Human development index is measured by three dimensions, health, education
Human Development Index HDI Index Human development report

Renewable energy
SC
and standard of living
Renewable energy consumption measured as renewable energy (Proxy of the
RE Tones per capita BP Statistical Review, 2015
Wind, hydro and solar energy)

U
Trade Ratio TR Trade is measured as a total of import and export of goods and services % of GDP World Bank

AN
Urbanization URB Urbanization is calculated as the growth rate of urban population % World Bank

M
D
TE
C EP
AC

12
 ACCEPTED MANUSCRIPT
4.2. Model specification

To examine the relationship between renewable energy consumption, economic growth,

and HDI by adding trade ratio, CO2 emission and urbanization into the single multivariate

framework, we develop the following model:

HDIt = α0 + β1GDPt + β2CO2t + β3 REt + β4URBt + β5TRt + µ1 (4.1)

PT
To avoid dynamic properties associated with data series we have transformed the data

RI
into the natural logarithmic form. Thus, Eq. (4.1) can be converted into the logarithmic form

of the equation given as follows:

SC
LOGHDI t = α 0 + β 1( LOGGDPt ) + β 2 ( LOGCO2 t ) + β 3 ( LOGREt ) +
(4.2)
β 4 ( LOGURB ) + β 5 ( LOGTR ) + µ 2

U
Where HDI represent human development index, GDP is economic growth, CO2
AN
represents the environmental condition, RE is renewable energy consumption per capita, and

URB is urbanization that annual urban growth rate and TR is traded ratio. μ is the stochastic
M

error term. The expected sign for the impact of economic growth on HDI is positive and
D

significant (β1 > 0). The expected sign of CO2 emission is negative, and it would worsen
TE

human development indicators (β2 < 0). Furthermore, the expected sign for the impact of

renewable energy on HDI is positive (β3 > 0), which implies that renewable energy
EP

consumption improves human development indicators. Also, urbanization has a negative

impact on HDI (β 4 < 0). In the case of trade openness, the expected sign is positive which
C

means that trade openness will improve the human development process (β5 > 0).
AC

Several control variables are incorporated in the model such as trade openness,

environmental factor, and urbanization. These variables are added to the model for the reason

that these factors are linked to renewable energy and economic growth and influence the

human development process. Davies and Quinlivan (2006) suggest that economic growth

positively mediates the relationship between trade and HDI. Trade create more employment

opportunities in the countries which enhance the per capita income. With an increase in per

13
 ACCEPTED MANUSCRIPT
capita, the living standard of the people improves. As a results health, education and

environmental performance would improve. Carbon emission caused to raise the global

health problem which is a vital indicator of the human development process. Sinha and Sen

(2016) found that in some BRICS courtiers CO2 emission has improved the human

development process, but in some countries, CO2 emission worsens human development

PT
process. Zaman et al. (2016a) found that environmental factor such carbon emission affects

the human health. Also, the renewable energy consumption, economic growth, and CO2

RI
emission are discussed in the literature, and positive relationship is found between them

SC
(Danish et al., 2017). Lastly, urbanization influences human development process. The urban

population access to better health and education facilities as compared to the people living in

U
the rural area. Also, people living in the urban areas have more employment opportunities. So
AN
it is evident that urbanization may affect the human development process.

4.3. Econometric Methodology

M

4.3.1. Two-stage least square model (2SLS)

D

Several studies have used 2SLS method to analyze time series data (Ozturk and Al-Mulali
TE

2015). In case of data with small sample size the econometric approaches, such as

cointegration may produce inconsistent estimates. Further the presence of various

EP

macroeconomic variables in the model which is well known to be highly correlated. In such

case, the regressor may correlate with error term, and the problem of multicollinearity may
C

arise. Thus, in the presence of multicollinearity OLS method may produce spurious results.
AC

Therefore a regression model is required to control correlation among variables. To resolve

the issue, several regression methods are available that apply instruments to eliminate the

effect of correlation between the independent variables and the residuals. Such as two-stage

least square (2SLS) regression recommended by (Cumby et al. 1983). The 2SLS model is an

extension of OLS method. It can be applied in case the dependent variables correlate with the

error term. In this paper the data sample is small; also the econometric model contains several
14
 ACCEPTED MANUSCRIPT
macroeconomic variables. Thus there is a chance that dependent variables may correlate with

error term, and the problem of multicollinearity may arise. Therefore, in this paper 2SLS

method is used to analyze the relationship between variables of consideration.

4.3.2. Vector Error correction model

VECM Granger causality approach is used to check causal relationship among

PT
underlying variable of the study. For time series data analysis VECM method is theoretically

helps to investigate the effect of one variable on another variable. This method is based on

RI
two-step procedure; in the first step, we calculate error correction term (ECM) and then run

SC
regression model including ECM. If the value of ECM is negative and significant, it directs

long-run causality between variables of interest. In the second step, Wald statistic is used to

U
calculate short-run causality. For the purpose, Wald statistic for all the regressor is calculated
AN
with error correction term. We explain the VECM Granger causality by the following

equation:
M

log HDI   β1 β11k β12k β13k β14k β15k β16k  ∆log HDIit  ρ1  ϑ1 
logGDP  β2 β β22k β23k β24k β25k β26k  ∆logGDP  ρ  ϑ 
D

     21k   it   2   2
logCO2   β3 β31k β32k β33k β34k β35k β36k  ∆logCO2it  ρ3  ϑ3 
 =   +  +  +   ecmit−1 +  
TE

 (4.3)
log RE   β4 β41k β42k β43k β44k β45k β46k  ∆log REit  ρ4  ϑ4 
logT   β5 β51k β52k β53k β54k β55k β56k  ∆logT  ρ  ϑ 
       it
  5  5
logURB  β6 β61k β62k β63k β64k β65k β66k  ∆logURBit  ρ6  ϑ6 
EP

In the above equation t, is shows the time span from 1990-2104. ecmit-1 is the lagged error
C

correction term is the stochastic error term, and ϑit indicates the stochastic error term.
AC

5. Empirical Results and Discussion

To check the normality of data before applying linear regression model is one of the pre-

requisite to avoid spurious regression. For this purpose, we draw a histogram and normal

probability plots of regression standardized residuals for the primary variable of the study

LOGHDI, LOGCO2, and LOGGDP. To visually check the normality, the results of histogram

and P–P plot is shown in Graph 2-4. A graphical study of Histogram and P-P plot of

15
 ACCEPTED MANUSCRIPT
LOGHDI indicates that most of the residual lies within the normal curve, very little residual

move outside, on the right side showing a little positive skewness and very few lies outside

on top peak, showing a little kurtosis (as shown Graph 2). Similar is the case of LOGCO2

emission, most of the values in Histogram lies within the normal curve, and very little

movement outside on both left side and right side of the graph and Kurtosis is negligible (as

PT
shown Graph 3). Also, the histogram and P-P plot of LOGGDP indicates that the values are

good lies between normal curves and there is a positive skewness as few values move

RI
towards outside on the right side of Histogram (as shown Graph 4). Exclusively, the data is

SC
normally distributed as frequently the residuals lie inside the normal curve.

Histograms (LogHDI)
U P-P plot (LogHDI)
AN
10 1
Theoretical cumulative distribution

9 0.9
8
0.8
7
M

0.7
Density

6
5 0.6
4 0.5
3
0.4
D

2
1 0.3
0 0.2
TE

-0.7 -0.6 -0.5 -0.4 -0.3 -0.2 0.1

LogHDI 0
0 0.2 0.4 0.6 0.8 1

LogHDI Normal(-0.331,0.077) Empirical cumulative distribution

EP

Figure 2: Histogram of residual and P–P plot of standardized residual for in LOGHDI
C

Histograms (logCO2) P-P plot (logCO2)

7 1
AC

Theoretical cumulative distribution

6 0.9
0.8
5
0.7
Density

4
0.6
3
0.5
2 0.4
1 0.3

0 0.2
-0.35 -0.25 -0.15 -0.05 0.05 0.1
logCO2 0
0 0.2 0.4 0.6 0.8 1

logCO2 Normal(-0.097,0.063) Empirical cumulative distribution

16
 ACCEPTED MANUSCRIPT
Figure 3: Histogram of residual and P–P plot of standardized residual for LOGCO2

Histograms (loggdp) P-P plot (loggdp)

12 1

Theoretical cumulative distribution

0.9
10
0.8
8 0.7
Density

6 0.6
0.5

PT
4
0.4
2 0.3
0.2
0

RI
2.7 2.75 2.8 2.85 2.9 2.95 0.1
loggdp 0
0 0.2 0.4 0.6 0.8 1

loggdp Normal(2.821,0.056) Empirical cumulative distribution

SC
Figure 4: Histogram of residual and P–P plot of standardized residual for LOGGDP

U
AN
It is evident from Table 2 that the actual value deviation from mean value among the six

variables in case of Pakistan. The result reported in Table 2 shows that LOGHDI, LOGCO2,
M

LOGGDP, LOGRE, LOGTR, and LOGURB deviate from the mean value by 0.077, 0.063,

0.056, 0.056, 0.269 and 0.025 respectively. Talk about correlation among variables, human
D

development is positively correlated with CO2 emission, economic growth, and renewable
TE

energy but negatively correlated with urbanization. Similarly, the correlation between CO2
EP

emissions and economic growth is positive. Also, CO2 emission positively correlated with

renewable energy consumption and trade openness but it has a negatively significant
C

relationship with urbanization. Also, economic growth has a significant positive relationship
AC

with renewable energy consumption, but it has a negative relation with trade and

urbanization, lastly trade is also a significant negative relationship with urbanization.

17
 ACCEPTED MANUSCRIPT
Table 2:
Summary Statistics and Correlation Matrix
Variable LOG HDI LOG CO2 LOG GDP LOG RE LOG TR LOG URB
Minimum -0.516 -0.210 2.734 -1.519 -1.404 0.473
Maximum -0.243 -0.003 2.910 -1.308 -0.359 0.570
Mean -0.331 -0.097 2.821 -1.398 -0.536 0.507
Std. deviation 0.077 0.063 0.056 0.056 0.269 0.025
Correlation Matrix
LOG HDI 1.000
LOG CO2 0.795 1.000

PT
LOG GDP 0.667 0.927 1.000
LOG RE 0.030 0.284 0.269 1.000
LOG TR 0.072 0.097 -0.212 0.117 1.000
LOG Urb -0.716 -0.678 -0.478 -0.095 -0.251 1.000

RI
Note: Software XLSTAT 2017 is used to calculate descriptive statistics and correlation matrix.

SC
Next OLS regression estimates are calculated, and the values are reported in Table 3. The

value of R2 in a linear regression model is 0.765, F= 12.401 with probability less than 0.0001.

U
So, the fitting of the model is good, and CO2 emission, economic growth, and trade ratio pass
AN
the t-test, but rest of the variables are insignificant with human development index as shown

in Table 3. The correlation coefficient between some of the variables is high, so the problem
M

of multicollinearity may exist. To check the presence of multicollinearity in the model, we

D

estimate the values of variance inflation factor (VIF) values for the regressor. VIF method is
TE

commonly used to check the problem of multicollinearity. The VIF value of LOGCO2 and

LOGGDP are greater than 10, which leads to the presence of a serious problem of
EP

multicollinearity in the model. Therefore, this data cannot be modeled using the OLS method,

because the presence of multicollinearity in the model leads to produce unreliable and biased
C

estimates. To overcome the multicollinearity among variables, the two-stage least square
AC

(2SLS) model is used as discussed earlier.

18
 ACCEPTED MANUSCRIPT
Table 3
Results of OLS regression model
Dependent Variable: LOGHDI
Variables Value Std. error t Pr > |t| VIF
b
Constant 4.314 2.382 1.811 0.086 --
b
LOG CO2 2.349 0.859 2.735 0.013 55.697
c
LOG gdp -1.643 0.876 -1.876 0.076 38.926
LOG R -0.221 0.165 -1.343 0.195 1.243
b
LOG TR -0.107 0.060 -1.785 0.090 4.124
LOG Urb -0.293 0.620 -0.472 0.642 3.176

PT
R-Squared 0.765 F-statistic 12.40
MSE 0.002 Prob. F-statistic < 0.000
RMSE 0.042

RI
Note:
b represents the level of significance at 5%.
c represents the level of significance at 10%.

SC
The estimates acquired from OLS regression are unreliable and biased due to the presence

U
of multicollinearity. Thus to get reliable and unbiased result 2SLS model is applied and the
AN
estimates are reported in Table 4.

The results from the table 4 are evident that renewable energy consumption is
M

inelastic to human development index (HDI) and the coefficient of renewable

D

energy consumption is statistically insignificant (β= -0.2209).

TE

This implies that renewable energy consumption is inelastic to human development index.

This finding is inconsistent by (Pirlogea, 2012) who found that renewable energy vigorously
EP

and positively influences human development with no exception. The result of the study is

also in line with (Ouedraogo, 2013), who found that electricity consumption reduced the
C

human development index. The result is also inconsistent with a finding of (Niu et al.,
AC

2013). In Pakistan, renewable energy cannot contribute to the human development process,

which may be due to the reason that use of renewable energy is inefficient for socio-

demographic purpose and it does not affect human health, education, and generation of

income, the major indicators of HDI. The other reason is low renewable energy production in

the country, and limited available renewable energy is consuming by industrial and service

sector. The situation of consumption of energy in health, education and household sectors is

19
 ACCEPTED MANUSCRIPT
worst which influences the human life. Growing renewable energy is not the problem, but its

limited access hampers the human development process. Pakistan is facing an alarming

situation of low HDI and a threat to energy security. Energy crises are pinching issue in

Pakistan affecting every sector of the economy. Renewable energy sources are the only way

to fill the gap between energy demand and energy supply and both energy security and

PT
human development can be addressed through the efficient use of renewable energy (Irfan

Afzal Mirza, Sana Ahmed, 2011). Whereas many time potential of renewable energy

RI
resources is available in the country as compared to conventional resources (Sheikh, 2010).

SC
The efficient use of renewable energy is helpful to improve the quality of life of poor masses,

economic empowerment. As we see from the estimation of results the situation is worst in

U
Pakistan. Thus we urge that government should add more renewable energy to energy mix
AN
and there is need to make possible the utilization the renewable energy in human

development processes such as education and health sector. Further, it is recommended that
M

government need to provide renewable sources of energy to households, schools, and

D

hospitals such as solar energy.

TE

More interestingly the economic growth has a negative influence (β= -1.6432) on
EP

the human development process, which suggests that economic growth is elastic

to human development index.

C

Interesting finding has generated for the relationship between economic growth and HDI
AC

in Pakistan. The negative value of coefficient implies that HDI decline with rising economic

growth. The result can be justified as economic growth rising in Pakistan from last few years,

but the access to education and rate of completion of primary schooling is among the lowest.

Another possible reason may be that rising economic growth shifts the structure of

production. About 70% of the population living in Pakistan engaged with agriculture sector;

with a shift in the production, the function may adversely affect the income of the people
20
 ACCEPTED MANUSCRIPT
participating in the agriculture sector. Also, with the rise in the economic growth newer

health challenges arise. We learn a listen from this finding that Pakistan is not investing in

their human in term of education and health, despite with increase in economic growth since

last decade. The allocation of budget for education and health is among the lowest in all the

developed countries. However, economic growth is not the reasons behind to slow the

PT
process of human development but, unexpected results gives another view that there may

some hidden factors such as corruption, governance, and political stability that affect the

RI
human development index, which is a potential area need to be investigated.

SC

Also, the coefficient of CO2 emission is positive and significant (ߚ=2.3439). This

U
implies that CO2 emission is elastic to human development. 1% increase in CO2
AN
emission improve human development indicator to increase by 2.3439%.

The finding suggests that environmental factors are helpful to improve human
M

development. The results are in line with (Sinha and Sen, 2016) who argued the same finding
D

in the case of Brazil and India. Clean energy is important to improve environmental quality,
TE

which helps to improve human development index. From the results we infer that CO2

emission improves HDI in Pakistan, which may occur due to the reason that growing CO2
EP

emission enforced policymakers to focus on clean energy; it may be the reason of positive

role of CO2 emission in HDI, so more production of clean energy will lead to improving HDI.
C

The latter result can be justified as it may be possible that green energy initiatives by taken up
AC

and this has been taken due to growing amount of CO2 emission in the country, which

enforced the policymakers to introduce clean energy initiatives, to get healthier HDI results.

Finally, the coefficient of trade has a significant negative effect on human

development. This implied that trade is elastic to human development in Pakistan.

21
 ACCEPTED MANUSCRIPT
1% increase in trade volume cause to decrease in human development index by

1.784%.

The result of trade ratio and human development process is interesting. The result can be

justified as trade volume increases in the country due to the export-oriented units of primary

goods. This expansion in the domestic income led to the uplifting of the living standard of the

PT
small group holding the entire economy in Pakistan. About 70% of the people leaving in rural

areas and agriculture are their main source of income. So rise in trade only beneficial for a

RI
concise group of people, which makes them a group of people more richer and poor becomes

SC
poorer. This leads to the issue of income inequality in the society. Consequently, due to the

limited access to the basic resources of life in Pakistan low value of HDI is reflected. It does

U
not mean a trade is reducing human development process, but trade is beneficial only to small
AN
group of people called industrialist and landlords which negatively affects the lives of those

poor people living in rural areas. Proper trades policies need to define that may directly affect
M

and improve the living standard of poor people living in rural areas.
D

Table 4:
Result of Simultaneous Two-Stage Least Square (2SLS) method and Generalized Moment method
TE

2SLS Model Generalized Moment model

Variable Coefficient t-Statistic Prob. Coefficient Z-Statistic Prob.
b a
LOGCO2 2.3493 2.7349 0.0132 2.3493 2.7349 0.0062
c c
LOGGDP -1.6432 -1.8760 0.0761 -1.6432 -1.8760 0.0607
EP

LOGRE -0.2209 -1.3428 0.1952 -0.2209 -1.3428 0.1793

c c
LOGTR -0.1071 -1.7846 0.0903 -0.1071 -1.7846 0.0743
LOGURB -0.2926 -0.4720 0.6423 -0.2926 -0.4720 0.6369
c c
C

Constant 4.3142 1.8110 0.0860 4.3142 1.8110 0.0701

Diagnostic Test
2
AC

R 0.76 F-statistic 12.40

2
Adjusted R 0.70 Prob(F-statistic) 0.000
LR (statistic) 62.00 Dw stat 1.91
2
Prob.LR (statistic 0.000 χ -LM Test 0.273
2
S.E. of regression 0.042 χ -ARCH 0.811
Note:
a represents the level of significance at 1%.
b represents the level of significance at 5%.
c represents the level of significance at 10%.

22
 ACCEPTED MANUSCRIPT
To check the robustness of estimates of 2SLS method, the generalized linear model

(GLM) is estimated, and the results are reported in table 4. The results from GLS direct that

renewable energy consumption, economic growth, and trade have a negative and significant

impact on the human development process. Further, the impact of CO2 emission on human

development index is positive which is quite interesting, and urbanization has insignificant

PT
relation with human development index. So it can be concluded that results of GLS are

similar 2SLS estimates. Thus the results of the study are robust and reliable. The diagnostic

RI
tests, such as Durbin Watson test, χ2-LM, and χ2-ARCH test are applied to check the

SC
endogeneity, serial correlation, and heteroscedasticity in the model. Results of diagnostics

tests of 2SLS approach are given at the bottom of Table 4. The results avoid the problem of

U
endogeneity, autocorrelation, and heteroscedasticity in the model. This implies the fitness of
AN
the model and results produced are well established and can be used for policy implication.

For investigation of the causal relationship among variable of consideration, VECM

M

Granger causality is employed, and results are shown in table 5. Results suggest that long-run
D

causal relationship exists between human development index and CO2 emission. This implies
TE

that CO2 emission affects the human development process in Pakistan, conversely low human

development cause to environmental pollution. The rest of the variables do not have a causal
EP

relationship with human development. Talk about short-run causality; economic growth has

bidirectional causality with CO2 emission, trade, and urbanization. Human development and
C

trade openness Granger cause each other. Similarly, trade has bidirectional causality with
AC

urbanization in the context of Pakistan.

23
 ACCEPTED MANUSCRIPT

Table 5:
Results of VECM Granger causality analysis

Short run Causality Wald χ2 Statistics Long-run χ2-statistics

PT
Variables LOGHDI LOGCO2 LOGGDP LOGRE LOGTR LOGURB ECM (-1)
c
LOGHDI -- 1.339[0.247] 0.222 [0.636] 1.057 [0.303] 2.9570 [0.0895] 0.750[0.386] 0.328[0.746]

RI
a a a a a
LOGCO2 3.68 [0.0000] -- 1.38E+25 [0.0000] 2.32E+22 [0.0000] 3.75E+23 [0.0000] 1.93E+24 [0.0000] -2.67E+12*[0.0000]
a a a
LOGGDP 0.6488 [0.4205] 237.05 [0.0000] -- 0.0813 [0.8263] 9.3072 [0.0023] 45.93 [0.0000] -0.6463[0.5267]

SC
a
LOGRE 1.703 [0.1919] 0.0528 [0.8182] 0.0230 [0.8794] -- 0.1189 [0.7302] 0.0021 [0.9626] 0.9187[0.6380]
a a c
LOGTR 1.125 [0.288] 39.22 [0.0000] 480.180 [0.0000] 0.0008 [0.9770] -- 2.846 [0.0916] -0.5155[0.6128]

U
a b
LOGURB 0.2228 [0.6369 7.641 [0.0057] 6.312 [0.0120] 0.0569 [0.8114] 1.897 [0.1683] -- 1.3775[0.18466]

AN
a b c
Note : , and represents level of significance at 1% ,5% and 10% respectively

M
D
TE
C EP
AC

24
 ACCEPTED MANUSCRIPT
6. Conclusion

The objective of this paper is to explore the relationship between renewable energy

consumption, economic growth and HDI incorporating trade openness, environmental

factors, and urbanization in the context of Pakistan for 1990-2014. The two-stage least

squares method is used to analyze time series data. To check casual relation among

PT
underlying variables of the study, we apply VECM Granger casualty approach. The

Empirical results of the study direct interesting and novel finding. First, economic growth has

RI
a significant negative effect on human development index. Economic growth reduces human

SC
development process in Pakistan. Second CO2 emission is helpful to improve human

development index. Furthermore, higher renewable energy does not play any role to improve

U
human development process in Pakistan. More interestingly, trade hampers human
AN
development process in the context of Pakistan. In addition, there is bidirectional causality

exists between CO2 emission and human development index.

M

The findings of the study direct some important policy implications. The government
D

needs to utilize the resources of renewable energy to reduce the energy crises in Pakistan.
TE

The government of Pakistan can achieve its millennium development goals to eliminate

severe poverty and hunger and to secure the objective of achieving environmental
EP

sustainability by resolving the issue of energy crises. For this purpose government of

Pakistan needs to integrate these goals with renewable energy consumption. Due to an
C

underdeveloped country, the economy of Pakistan cannot install project of conventional

AC

energy. The production of energy from conventional sources, i.e., coal, gas, and oil are also

hazardous to health. Our findings suggest that policymakers should plan to design the

projects for the production of renewable energy in Pakistan. The country can produce energy

from the wind, solar and hydel sources in the different area of the country. In doing so,

Northern parts of Pakistan can produce clean and cheap energy from water. At the same time,

Pakistan’s policymakers need to revise tax policy and make it fruitful to attract foreign and
25
 ACCEPTED MANUSCRIPT
local investors to exploit the renewable energy resource in the country. Productive use of

renewable energy addresses the issue of lower HDI in Pakistan by improving the quality of

life and economic empowerment of poor people in the country. It will contribute to achieving

the Millennium Development Goals.

The negative impact of economic growth on HDI directs that government of Pakistan

PT
allocate most of its budgets to unproductive purpose like roads, Prime Minister Laptop

scheme, etc. unproductive use of budget creates serious problems to health and education,

RI
and the poverty level is rising. Therefore, we urge that government need to allocate more

SC
budget to education and health which may be helpful to improve the HDI. Also, there is

desire need to create employment opportunities in rural areas of the country to enhance their

U
income which will improve the living standard of the people living in rural area.
AN
Next, trade hampers the human development process in the country. Talk about Pakistan,

most of its population attached to agriculture sector which is snubbed by the government
M

since the last one decade. The government needs to focus toward industry and invests more in
D

this area. Which is a burden on the economy, and it is need of time to emphasize mainly on
TE

agriculture sector of the country. It is suggested to install small-scale industrial project to

increase the level of income of poor people living in rural areas. Poverty is the key reason for
EP

lower human development in Pakistan and one the main culprit growing poverty in the

country is income inequality. Rich become richer and poor become poorer, which is one the
C

potential area needs to be investigated that how poverty and income inequality affect human
AC

development process in the country.

This study has some important limitation. The novel finding of the study directs

interesting negative finding between economic growth and human development index which

indicates towards the existence factor hidden, such as corruption, political instability, and

institutional quality which need further investigation. Also, the similar model can be applied

in other developing countries to helps policymakers to better understand the role of

26
 ACCEPTED MANUSCRIPT
renewable energy and economic growth in the human development process in these

countries.

Acknowledgement

This study is supported by the National Science Fund for Distinguished Young

Scholars (Reference No. 71625003), Yangtze River Distinguished Professor of MOE,

PT
National Key Research and Development Program of China (Reference No.

2016YFA0602504), National Natural Science Foundation of China (Reference No.

RI
91746208, 71573016, 71403021, 71521002, 71774014), Humanities and Social science Fund

SC
of Ministry of Education of China (Reference No.17YJC630145), China Postdoctoral

Science Foundation (Reference No. 2017M620648).

References
U
AN
Alper, A., Oguz, O., 2016. The role of renewable energy consumption in economic growth: Evidence
from asymmetric causality. Renew. Sustain. Energy Rev. 60, 953–959.
doi:10.1016/j.rser.2016.01.123
M

Arifin, J., Syahruddin, N., 2011. Causality relationship between renewable and non-renewable energy
consumption and GDP in Indonesia *. Econ. Financ. Indones. 59, 1–17.
D

doi:https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1879843

Bhattacharya, M., Paramati, S.R., Ozturk, I., Bhattacharya, S., 2016. The effect of renewable energy
TE

consumption on economic growth: Evidence from top 38 countries. Appl. Energy 162, 733–741.
doi:10.1016/j.apenergy.2015.10.104

Bowden, N., Payne, J.E., 2010. Sectoral Analysis of the Causal Relationship Between Renewable and
EP

Non-Renewable Energy Consumption and Real Output in the US\r\n. Energy Sources, Part B
Econ. Plan. Policy 5, 400–4008. doi:10.1080/15567240802534250
C

BP Statistical Review, 2015. Statistical Review of World Energy.

http://www.bp.com/productlanding.do?categoryId=6848&contentId=7033471 1–6.
AC

doi:https://www.bp.com/en/global/corporate/energy-economics/statistical-review-of-world-
energy.html

Chang, T., Gupta, R., Inglesi-Lotz, R., Simo-Kengne, B., Smithers, D., Trembling, A., 2015.
Renewable energy and growth: Evidence from heterogeneous panel of G7 countries using
Granger causality. Renew. Sustain. Energy Rev. 52, 1405–1412. doi:10.1016/j.rser.2015.08.022

Costantini, V., Monni, S., 2008. Environment, human development and economic growth. Ecol. Econ.
64, 867–880. doi:10.1016/j.ecolecon.2007.05.011

Cumby, R.E., Huizinga, J., Obstfeld, M., 1983. Two-step two-stage least squares estimation in models
with rational expectations. J. Econom. 21, 333–355. doi:10.1016/0304-4076(83)90049-0

Danish, Zhang, B., Wang, B., Wang, Z., 2017. Role of Renewable Energy and Non-Renewable
27
 ACCEPTED MANUSCRIPT
Energy consumption on EKC: Evidence from Pakistan. J. Clean. Prod. 156, 855–864.
doi:10.1016/j.jclepro.2017.03.203

Davies, A., Quinlivan, G., 2006. A panel data analysis of the impact of trade on human development.
J. Socio. Econ. 35, 868–876. doi:10.1016/j.socec.2005.11.048

Dogan, E., 2016. Analyzing the linkage between renewable and non-renewable energy consumption
and economic growth by considering structural break in time-series data. Renew. Energy 99,
1126–1136. doi:10.1016/j.renene.2016.07.078

PT
Ewing, B.T., Sari, R., Soytas, U., 2007. Disaggregate energy consumption and industrial output in the
United States. Energy Policy 35, 1274–1281. doi:10.1016/j.enpol.2006.03.012

Hafner, K.A., Mayer-Foulkes, D., 2013. Fertility, economic growth, and human development causal

RI
determinants of the developed lifestyle. J. Macroecon. 38, 107–120.
doi:10.1016/j.jmacro.2013.04.001

SC
Hou, J., Paul, P., Zhang, J., 2014. The dynamics of Human Development Index
. Soc. Sci. J.
doi:10.1016/j.soscij.2014.07.003

Inglesi-Lotz, R., 2015. The impact of renewable energy consumption to economic growth: A panel

U
data application. Energy Econ. 53, 58–63. doi:10.1016/j.eneco.2015.01.003
AN
Irfan Afzal Mirza, Sana Ahmed, M.S., 2011. Renewable Energy in Pakistan : Opportunities and
Challenges 16, 13–20.

Kahia, M., Ben A??ssa, M.S., Charfeddine, L., 2016. Impact of renewable and non-renewable energy
M

consumption on economic growth: New evidence from the MENA Net Oil Exporting Countries
(NOECs). Energy 116, 102–115. doi:10.1016/j.energy.2016.07.126

Karekezi, S., McDade, S., Boardman, B., Kimani, J., 2012. Energy, Poverty, and Development. Glob.
D

Energy Assess. 151–190.

TE

Kazar, G.., Kazar, A.., 2014. The renewable energy production-economic development Nexus. Int. J.
Energy Econ. Policy 4, 312–319.
doi:http://www.econjournals.com/index.php/ijeep/article/view/786
EP

Khodabakhshi, A., 2011. Relationship between GDP and Human Development Indices in India. Int. J.
Trade, Econ. Financ. 2, 251–253. doi:10.7763/IJTEF.2011.V2.111

Kocak, E., Sarkgunesi, A., 2017. The renewable energy and economic growth nexus in black sea and
C

Balkan Countries. Energy Policy 100, 51–57. doi:10.1016/j.enpol.2016.10.007

AC

Lin, B., Moubarak, M., 2014. Renewable energy consumption - Economic growth nexus for China.
Renew. Sustain. Energy Rev. 40, 111–117. doi:10.1016/j.rser.2014.07.128

Menegaki, A.N., 2011. Growth and renewable energy in Europe: A random effect model with
evidence for neutrality hypothesis. Energy Econ. 33, 257–263. doi:10.1016/j.eneco.2010.10.004

Menyah, K., Wolde-Rufael, Y., 2010. CO2 emissions, nuclear energy, renewable energy and
economic growth in the US. Energy Policy 38, 2911–2915. doi:10.1016/j.enpol.2010.01.024

Morley, B., Abdullah, S., 2104. Environmental Taxes and Economic Growth : Evidence from Panel
Causality Tests Department of Economics Environmental taxes and Economic Growth :
Evidence from Panel Causality Tests.
doi:http://opus.bath.ac.uk/38269/1/Taxes_and_Economic_GrowthEER3.pdf

28
 ACCEPTED MANUSCRIPT
Neelankavil, J.P., Stevans, L.K., Roman, F.L., 2012. Correlates of economic growth in developing
countries : a panel cointegration approach. Int. Rev. Appl. Econ. 26, 83–96.
doi:doi/abs/10.1080/02692171.2011.557048

Niu, S., Jia, Y., Wang, W., He, R., Hu, L., Liu, Y., 2013. Electricity consumption and human
development level: A comparative analysis based on panel data for 50 countries. Int. J. Electr.
Power Energy Syst. 53, 338–347. doi:10.1016/j.ijepes.2013.05.024

Ocal, O., Aslan, A., 2013. Renewable energy consumption-economic growth nexus in Turkey.
Renew. Sustain. Energy Rev. 28, 494–499. doi:10.1016/j.rser.2013.08.036

PT
OECD, 2012. Linking Renewable Energy to Rural Development 1–18.
doi:http://www.oecd.org/regional/linkingrenewableenergytoruraldevelopment.htm

RI
Ouedraogo, N.S., 2013. Energy consumption and human development: Evidence from a panel
cointegration and error correction model. Energy 63, 28–41. doi:10.1016/j.energy.2013.09.067

SC
Ozturk, I., Al-Mulali, U., 2015. Investigating the validity of the environmental Kuznets curve
hypothesis in Cambodia. Ecol. Indic. 57, 324–330. doi:10.1016/j.ecolind.2015.05.018

Pirlogea, C., 2012. The Human Development Relies on Energy. Panel Data Evidence. Procedia Econ.

U
Financ. 3, 496–501. doi:10.1016/S2212-5671(12)00186-4
AN
Rafindadi, A.A., Ozturk, I., 2016. Impacts of renewable energy consumption on the German
economic growth: Evidence from combined cointegration test. Renew. Sustain. Energy Rev. 75,
0–1. doi:10.1016/j.rser.2016.11.093
M

Raheem, A., Abbasi, S.A., Memon, A., Samo, S.R., Taufiq-Yap, Y.H., Danquah, M.K., Harun, R.,
2016. Renewable energy deployment to combat energy crisis in Pakistan. Energy. Sustain. Soc.
6, 16. doi:10.1186/s13705-016-0082-z
D

Ranis, G., 2004. Human Development and Economic Growth. Yale Univ. doi:CENTER
DISCUSSION PAPER NO. 887 HUMAN. http://www.econ.yale.edu/~egcenter/
TE

Sadorsky, P., 2009. Renewable energy consumption and income in emerging economies. Energy
Policy 37, 4021–4028. doi:10.1016/j.enpol.2009.05.003
EP

Saidi, K., Ben Mbarek, M., 2016. Nuclear energy, renewable energy, CO2 emissions, and economic
growth for nine developed countries: Evidence from panel Granger causality tests. Prog. Nucl.
Energy 88, 364–374. doi:10.1016/j.pnucene.2016.01.018
C

Sebri, M., Ben-Salha, O., 2014. On the causal dynamics between economic growth, renewable energy
consumption, CO2 emissions and trade openness: Fresh evidence from BRICS countries.
AC

Renew. Sustain. Energy Rev. 39, 14–23. doi:10.1016/j.rser.2014.07.033

Shahbaz, M., Loganathan, N., Zeshan, M., Zaman, K., 2015. Does renewable energy consumption
add in economic growth? An application of auto-regressive distributed lag model in Pakistan.
Renew. Sustain. Energy Rev. 44, 576–585. doi:10.1016/j.rser.2015.01.017

Sheikh, M.A., 2010. Energy and renewable energy scenario of Pakistan 14, 354–363.
doi:10.1016/j.rser.2009.07.037

Sinha, A., Sen, S., 2016. Atmospheric consequences of trade and human development: A case of
BRIC countries. Atmos. Pollut. Res. 7, 980–989. doi:10.1016/j.apr.2016.06.003

Term, M., Population, T., Growth, A., Growth, M.P., Education, P., Development, I., Evaluation, M.,

29
 ACCEPTED MANUSCRIPT
Resource, C., Development, I., Wash, E., Management, D., 2013. HANDS Strategy 2020 Brief.

Tiwari, A.K., 2011. Volume 31 , Issue 2 A structural VAR analysis of renewable energy consumption
, real GDP and. Econ. Bull. 31, 1793–1806.
doi:http://www.accessecon.com/Pubs/EB/2011/Volume31/EB-11-V31-I2-P164.pdf

UNDP, 2014. Human Development Report 2014: Sustaining Human Progress. doi:ISBN: 978-92-1-
126340-4

Warr, B.S., Ayres, R.U., 2010. Evidence of causality between the quantity and quality of energy

PT
consumption and economic growth. Energy 35, 1688–1693. doi:10.1016/j.energy.2009.12.017

World Bank, 2015. Human Development index data of Pakistan Human Development Indicators.
doi:http://hdr.undp.org/en/countries/profiles/PAK

RI
Zaman, K., Ahmad, A., Hamzah, T.A.A.T., Yusoff, M.M., 2016. Environmental Factors Affecting
Health Indicators in Sub-Saharan African Countries: Health is Wealth. Soc. Indic. Res. 129,

SC
215–228. doi:10.1007/s11205-015-1100-9

U
AN
M
D
TE
C EP
AC

30
 ACCEPTED MANUSCRIPT

Highlights

• Role of Renewable energy and Economic growth is studied in Human development

PT
process

RI
• Two-Stage Least Square (2SLS) methods is applied

• Renewable energy consumption discourages human development process

SC
• Economic growth has negative diminishing effect on Human development index

• Environmental factors improves human development process in Pakistan

U
AN
M
D
TE
C EP
AC