Carbon Dioxide Emission, Human Capital and Economic Growth: Long-Run Relation with Short-Run Dynamics

Abstract

This paper examine the causal relationship between CO 2 emission, human capital, and economic growth using an autoregressive distributed lag model during a period of 1981-2017. The result showed that CO 2 emission has a negative effect in the long-run and positive effect in the short-run, while human capital has a positive effect in the long-run and negative effect in the short-run on economic growth in Ethiopia. The result of Granger causality showed that a bidirectional causal relationship from reduction of CO2 emission to economic growth, from human capital to economic growth and a unidirectional causal relationship between human capital and reduction of CO2 emission in Ethiopia. However, there is no significant causality from human capital to reduction of CO2 emission. Policymakers should emphasize human capital development and establish policies, strategies, and programs related to the reduction of CO2 emission in Ethiopia.