Human Capital, Natural Resource Rents and Iran’s Load Capacity Factor: An ARDL–ECM Approach

Document Type : Research Paper

Authors

1 Department of Economics, Tarbiat Modares University, Tehran, Iran.

2 School of Administrative Studies, York University, Toronto, Canada.

Abstract

Understanding the dynamics between economic growth and environmental sustainability—especially in natural-resource-dependent economies—is fundamental for achieving sustainable development. This study examines the determinants of environmental sustainability in Iran by analyzing the effects of GDP, human capital, energy efficiency, and natural resource rents on the load capacity factor (LCF—the ratio of biocapacity to ecological footprint) over 1990–2020 using an ARDL framework. Long-run results reveal statistically significant relationships consistent with theoretical expectations: GDP has a negative and sizable effect on LCF, indicating that the current energy- and extraction-intensive growth pattern exacerbates environmental pressure. Human capital exerts a positive and significant effect on LCF, highlighting the role of education and skills in improving productivity and sustainable resource management. Energy-efficiency indicators also show a relatively strong positive impact, suggesting that higher output per unit of energy consumption effectively enhances ecological sustainability. Conversely, natural resource rents negatively and significantly affect LCF, implying that reliance on extractive revenue undermines biocapacityvia mechanisms such as economic dependence on extraction and reduced incentives for innovation. The error-correction term (−0.634) is negative and significant, implying an annual adjustment of roughly 63% of short-run deviations back to the long-run equilibrium. Policy implications recommend prioritizing energy-efficiency improvements, targeted investment in specialized education and green technologies, economic diversification to reduce rent dependence, and the adoption of environmental pricing tools (e.g., carbon taxes or emissions trading) to better align economic growth with ecological sustainability.

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Main Subjects


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