Does Chinese FDI, Climate Change, and CO2 Emissions Stimulate Agricultural Productivity? An Empirical Evidence from Pakistan

Abstract

Pakistan’s agricultural sector growth is dwindling from the last several years due to insufficient foreign direct investment (FDI) and a drastic climate change-induced raise in temperature, which are severely affecting agricultural production. The FDI has paramount importance for the economy of developing countries as well as the improvement of agricultural production. Based on the time series data from 1984 to 2017, this paper aims to highlight the present situation of the agriculture sector of Pakistan and empirically analyze the short-run and long-run impact of Chinese foreign direct investment (CFDI), climate change, and CO2 emissions on agricultural productivity and causality among the variables. The Autoregressive Distributed Lag Model (ARDL) model and Granger Causality test were employed to find out the long-run, short-run, and causal relationships among the variables of interest. Furthermore, we have employed the Error Correction Model (ECM) to know the convergence of the equilibrium path. The bound test results verified the existence of a long-run association, and the empirical findings confirmed that Chinese FDI has a significant and positive impact, while climate change and CO2 emissions has negative impact on the agricultural growth of Pakistan both in the short-run and long-run. Granger Causality test results revealed that variables of interest exhibit bi-directional and uni-directional causality. The sector-wise flow of FDI reveals that the agriculture sector of Pakistan has comparatively received a less amount of FDI than other sectors of the economy. Based on the findings, it was suggested to the Government of Pakistan and policymakers to induce more FDI in the agriculture sector. Such policies would be helpful for the progress of the agriculture sector as well as for the economic growth of Pakistan.

Addressing the long- and short-run effects of climate change on major food crops production in Turkey

“…It implies that 1% increase in the level of precipitation will lead to improve rice production by 0.20% and 0.19% in the long and short run. The results agree with the research of (Ahmad et al 2020;Ali et al 2017;Sossou et al 2019;Zaied and Cheikh 2015). Khan et al (2019) explored that the maximum level of temperature has a negative influence on maize production while rainfall positively improves maize production in Pakistan.…”

“…It implies that 1% increase in precipitation level will increase wheat production by 0.06% and 0.08%. The findings of precipitation are strongly substantiated by Ahmad et al (2020) and Zaied and Cheikh (2015), who found that precipitation positively improved crop production.…”

“…The agriculture sector has played a major role in the development of national economies of both developed and developing countries by providing raw material for other industries, contributing to the development of non-agricultural sectors, and providing foreign exchange earnings as an internationally traded commodity. The harmony between agricultural and other sectors promotes the economic growth of the countries (Ahmad et al 2020). A significant portion of the population of many countries live in rural areas, and agriculture and related sectors are the dominant sources of income for these families.…”

“…In our empirical model, we also consider the potential impact of harvested area for each crop, domestic credit, and agriculture labor force. The labor force has been considered by the economic growth theories as among the most fundamental long-run determinants of economic growth (Ahmad et al 2020). This variable has been employed in the agricultural production literature as well.…”

Assessing the effect of climate change and financial development on agricultural production in ASEAN-4: the role of renewable energy, institutional quality, and human capital as moderators

“…This is particularly true for the agricultural sector since the increase in average annual temperature and other climatic changes are deteriorating the productivity growth of this sector and aggravating global food insecurities (Abbas, 2020;IPCC, 2014;Kotir, 2011). Many species of agricultural crops are highly sensitive to climatic changes associated with increasing temperature, changing pattern and intensity of rainfall, concentration of carbon dioxide (CO2), rising sea level, and intensity of natural disasters (Ahmad et al, 2020;Boonwichai et al, 2019;Mendelsohn, 2014).…”