A global analysis of asymmetric sustainability effects of human and natural capital resources

Assessing whether and how a country is achieving sustainable growth remains one of the most controversial issues in environmental and resource economics. In particular, there is no clear empirical consensus in the existing literature on the degree of substitutability (complementarity) between human and natural capital resources, especially when spatial spillovers are present. This challenging issue calls for further theoretical and empirical insights. To advance and highlight the ongoing debate, we use a sample of 124 countries for the period 1995–2018 and utilise both an Asymmetric Error Correction Model (AECM) and an Asymmetric Spatial Error Correction Model (ASpECM) to explore the degree of substitutability between the two forms of capital. The empirical findings unveil a short-run asymmetric behaviour between human and natural capital which is evident in both types of models (spatial and non-spatial). It is noteworthy that a complementarity relationship appears to be evident when natural capital increases. However, this result is reversed when natural capital decreases, indicating that the two forms of capital are then substitutes. Finally, we find that the existence of long-run symmetry in the non-spatial model embodies a strong bias, if we take account of the existence of spatial dependence, meaning that human capital adjusts more rapidly in response to a negative deviation from its long-run equilibrium with natural capital than to a positive deviation.