The Impact of Socio-cultural and Environmental Deterioration Factors on Economic Sustainability in G7 Countries

Abstract

The paper provides the examination of economic sustainability based on the impact of socio-cultural factors and the environmental deterioration factors. This empirical analysis focuses particularly on G7 countries, and panel time series during the period 2000-2022 are used to test this relationship. It applies several variables to determine these impacts that are tested with a principal component analysis and generalized least square estimation. According to Hofstede (1980) which is explained the culture dimensions (masculinity, power distance, uncertainty avoidance, and indulgence); and U-shaped in Environmental Kuznets curve (EKC) which showed the relationship between environmental deterioration and income level. Socio-cultural variables are divided into three groups: “socio-development”, “Hofstede dimensions”, and “economic development”. Environmental deterioration variables are divided into two groups: “air pollution”, and “water pollution”.  The paper indicates the hypothesis that socio-cultural variables significantly impact economic sustainability; and the significant impact of environmental deterioration variables on economic sustainability. The findings shows that socio-cultural negatively impacts economic sustainability, and environmental deterioration positively affects economic sustainability. Different tests apply to determine these effects, Hausman test to determine either Fixed effect or Random effect, Heteroscedasticity test (Durbin Watson test), Persan’s CD to test the serial correlation and Jarque-Berra test to confirm the normality distribution.