Institutional quality, economic growth, and environmental sustainability: a long-run analysis of the ecological footprint in Somalia

Abstract

This study investigates the complex linkage between economic growth, institutional quality, urbanization, trade openness, and Somalia’s ecological footprint from 1990 to 2020. To ensure reliable results, we initially conducted an assessment of the order of integration of our variables through the use of the augmented Dickey-Fuller (ADF) and the Phillips-Perron (PP) stationarity tests, which indicated a mixed order of integration. Following this, we employed the autoregressive distributed lag (ARDL) technique, in combination with the fully modified ordinary least squares (FMOLS) and canonical cointegrating regression (CCR) methods, to investigate the long-term relationships and causal connections between these variables, further supported by the application of the Granger causality test. Our findings indicate that a 1% increase in GDP per capita increases the ecological footprint by 3.79%, while a 1% increase in GDP per capita squared decreases it by 0.05%. This supports the environmental Kuznets curve hypothesis, which means that at higher stages of economic development, the damage to the environment decreases. However, improvements in institutional quality have had minimal and statistically insignificant effects on the ecological footprint. While urbanization showed a considerable impact in the long run, its short-term effects were minimal. Interestingly, trade openness emerged as a positive factor, contributing to a reduction in the ecological footprint over time. To build a sustainable future, Somalia should balance economic growth with environmental protection by prioritizing green technologies, enhancing governance for enforcing environmental regulations, integrating sustainability into urban planning, and promoting trade in clean technologies to reduce its ecological footprint.