Economic and environmental implications of resource rent: A dual analysis of Venezuela's sustainability.

Venezuela is among the several countries of the world endowed with natural resources such as oil rent and others. The influence of these resources, which can be felt in both economic and environmental development, is capable of impacting sustainable development goals of any country rich in them. Considering the global climate goals, it is essential to investigate the impact of natural resource rent on its sustainable development goals. We applied Venezuelan country‐specific data of 1972–2014 for an insightful study of the country's sustainable development amidst high resource rent with regard to both economic and environmental performance. The principles of the environmental Kuznets curve (EKC) and pollution haven and halo hypothesis (PHH) were considered to ascertain the pattern and effect of the economic growth and foreign direct investment (FDI) on Venezuelan environmental performance. Different methods such as the autoregressive distributed lag (ARDL) dynamics and bounds, structural break, and Granger causality test were applied for an accurate estimation and insightful analysis. From the ARDL estimations, we found an N‐shaped Kuznets curve, which counters the U‐shaped Kuznets, for the case of Venezuela. Both natural resources and FDI are found to impact positively on the environment, and this confirmed the pollution halo hypothesis for Venezuela. Fossil fuel energy source is found to impact negatively Venezuela's environment with positive relationship between energy use and CO2. From the Granger causality finding, a unidirectional Granger causality is found to transmit from FDI to environment, while bidirectional Granger causality is found to transmit between economic growth and environment. With the findings from both analyses, especially from the vector error correction model (VECM) Granger causality, a nexus is established among economic growth, environment, and FDI, which confirmed the pollution halo hypothesis. [ABSTRACT FROM AUTHOR]