Growth limits and ecological capacity in developing countries

Abstract

This study examines the Load Capacity Factor (LCF) as a comprehensive indicator of environmental sustainability in 61 developing countries from 1992 to 2021. This research provides empirical novelty by combining a broad cross-country coverage with a dynamic SYS-GMM approach to uncover both linear and nonlinear drivers of ecological capacity. The primary objective is to assess the influence of economic, social, and institutional determinants, while also examining the nonlinear relationship between per capita income and ecological capacity through the load capacity curve framework. The results reveal an inverted U-shaped relationship between GDP and LCF. The findings suggest that without sustainable policies in place, the attainment of education, health, and increased living standards will elevate the span of resource use and environmental strain to a greater extent than the development will reduce LCF. The resource rent of natural capital illustrates the extent to which resource endowments aid in the development of biocapacity. The negative, significant impact of industrialization demonstrates that the production systems of developing nations continue to be heavily weighted toward negative environmental impacts. The data shows that political stability, and therefore, good governance, plays a substantial role in alleviating environmental pressure and resource management. This also shows that positive governance plays a substantial role in alleviating environmental pressure and resource management. These findings highlight the importance of integrating economic progress with institutional strengthening and proactive environmental policies to ensure long-term ecological sustainability in developing countries. These findings underscore the urgency of integrating economic growth with institutional quality and proactive environmental governance. Key policy directions include strengthening governance to boost ecological resilience, channeling resource rents into environmental restoration, accelerating the transition to clean energy, and steering industrial and human development toward sustainable pathways.