







































Asian Themes in Social Sciences Research 
ISSN: 2578-5516 

Vol. 1, No. 1, pp. 28-33 
2018 

DOI: 10.33094/journal.139.2018.11.28.33 
© 2018 by the author; licensee Online Academic Press, USA 

28 
© 2018 by the author; licensee Online Academic Press, USA 

  
 
 
 

Revisiting the Economic Growth-Welfare Linkages: Empirical 
Evidence from Nigeria 
 
 
 

Richardson Kojo Edeme 

Department of Economics, Faculty of the Social Science, University of Nigeria, Nsukka, Nigeria. 
 

 

 
 

Abstract 

This study aims at ascertaining the relationship between welfare and economic growth in 
Nigeria, capturing both economic and environmental welfare. Nitrous oxide emission and 
Carbon dioxide emission in Nigeria are used to capture environmental welfare while 
government education expenditure, per capita health expenditure and per capita income are 
used to capture economic welfare. Using quarterly data spanning 1999-2016 and employing 
the cointegration analysis as well as the Ordinary Least Squares (OLS) estimation technique, 

the study found that a long-run relationship exists between economic growth and welfare in 
Nigeria. It also found that both environmental and economic welfare  significantly affect 
economic growth in Nigeria. 

  
 

Keywords: Economic growth, Welfare, Per capita health expenditure, Per capita income, Economic welfare, 
Environmental welfare, Nitrous oxide emission, Carbon dioxide emission. 
Licensed:  This work is licensed under a Creative Commons Attribution 4.0 License.  

 
 
1. Introduction 

In economics, it is argued that social welfare should be in accordance with the growth level of a country. 
Thus, economic development will be undermined if the authorities fail to provide enough welfare for the 
people as growth occurs (Sardar, Islam and Clarke, 2002, Awan, 2015). The relationship between economic 
growth and well-being has a long and complex linkage or inter-connection, especially linking them with 
sustainable development. Perhaps, this spur the seminal work of the World Commission on Environment & 
Development (WCED) which linked development with three sustainable indices, decomposed into: 
environment, economic and social. Arising from this, there was paradigm shift in the definition of economic 
development to sustainable development which is defined as a process that meets present needs without 
compromising the ability of future generations to meet their own needs. The WCED importantly attaches 
strong emphasis to issues of equity, especially the goal of alleviating poverty in societies where majority of of 
the citizens benefit from the opportunities provided by the development process (Neumayer, 1999).  

A contrasting perspective on the challenge of reconciling growth, social welfare and the needs of future 
generations was however put forward by Meadows, et al, on their prediction that natural resource depletion 
and environmental degradation would lead to an irreversible collapse of the global economy by the early 21 st 
century. Unlike the WCED, Meadows, Randers and Meadows (2004) present straightforward argument that 
because economic growth is the perceived driver behind resource depletion and environmental degradation, 
the consideration of economic growth should be embedded in the objective in the attainment of sustainability. 
This view has however been criticized on the premise that economic growth is fundamental to the 
improvement of welfare and future generation and as such policies that retards growth should be treated as 
unworkable and detrimental (Abramowitz, 1981). The effect of economic welfare development on economic 
growth in recent times is emphasized on the growth theory (Romer 1990, Balami, 2006). An interesting idea in 
their work was that, in the long-run, output per unit of input could increase even when inputs were 
exhaustively accounted for. Technically, advanced human capital and a growing knowledge base appear to be 

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part of this wellspring of growth. An implication of Lucas hypothesis on economic welfare is thus; associated 
with investment in knowledge as a productive resource. This underscores the fact that economic processes 
which create and diffuse new knowledge are essential to shaping the growth of nations (Balami, 2006, 
Adelakun, 2011). 

The general proposition that economic growth is good for the environment has been justified by the claim 
that there exists am empirical and some measures of environmental quality. It has been observed that when 
income is high, there is increasing environmental degradation up to a point after which environmental quality 
improves. That is, poor countries cannot afford to emphasize amenities over material well -being. 
Consequently, in the earlier stages of economic development, increased pollution is regarded as an acceptab le 
side effect of economic growth. However, when a country has attained a sufficiently high standard of living, 
people give greater attention to environment legislation, new institutions for the protection of the 
environment, economic and social welfare. The wellbeing of the current generation depends on both the flow 
of consumption it receives during its own lifetime. In another strand, it has also been contended that economic 
growth which necessarily leads to an enhanced quality of life and improved high-income societies is also 
problematic from a social science perspective. As argued by Howarth, Rosenwald and Rosenwald (2012) 
eventhough economic growth provides a mix of benefits and costs in terms of its contribution to human 
welfare, evidence have shown that in most developing countries, growth have been able to provide material 
goods that can just satisfy urgent needs given that institutions that allocates goods and services to the poor 
are weak and in some cases, non existence. In developing societies, however, growth has generated complex 
set of social and environmental costs. 

However, recent literature has contrasted economic welfare, described as the ultimate goal of the growth 
process, with economic growth described as an imperfect proxy for more general welfare, or as a means 
toward enhanced economic welfare. This debate has broadened the definition and goals of growth, but still 
need to expose the important interrelations between economic growth and welfare. Moreover, the widespread 
clamour for immediate draconian action to reduce the danger of global warming is an unjustifiable diversion of 
attention from the more serious environmental problems facing developing countries. Resources constraints 
do not constitute limits to growth, and the likely economic damage done by climate change would be a 
negligible proportion of world output (OECD Council Meeting, 2015). The loss of welfare of the population in 
developing countries today as a result of inadequate access to safe drinking water and sanitation, renewable 
energy consumption, carbon dioxide emission and natural resource depletion is an indication that growth-
welfare relationship should be given priority in order to meet the growth needs of the present and future 
generation. This paper contributes to existing literature by developing new empirical strategy to estimate the 
linkage between economic growth and welfare in Nigeria using different measures of sustainable development 
indices. 
 

2. Materials and Materials 
The data set for this study consists of secondary time series spanning 1999 through 2016. The variables 

under consideration are: The variables are obtained from the World Bank’s World Development Indicators 
(2015) and Central Bank of Nigeria Statistical Bulletin (2016). From the foregoing, it is established that there 
are several theories on both economic growth and welfare. However, the theoretical framework of the study is 
anchored on the traditional welfare theory, neoclassical welfare theory. Further to Verfaillie and Bidwell 
(2000) where eco-efficiency was a key concept, this study brings together the economic and ecological 
variables which are necessary for economic and socio sustainability.  

This study adopts the multiple regression models, This is essential in this is to capture the indiv idual 
impact or effect of each independent variable on the dependent variable as well as determining the rate at 
which they (the independent variables) affect the dependent variable.  

In order to examine the impact of Economic Growth on welfare a linear functional relationship of the 
form is established 
 

 1 
 
Linearizing Equation 1 gives: 
 

 2 
 

    

  (3) 

 
Variables in the models are defined as follows: LNQGDP = economic growth (proxied by real growth in 

gross domestic product) , QCO2E = carbon dioxide emission, QGEE = government education expenditure as a 



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© 2018 by the author; licensee Online Academic Press, USA 

percentage of gross national income, QNOE  = nitrous oxide emission, QPCHE= per capita health expenditure 
and QPCI = economic welfare (proxied by per capita income) 
 

3. Theories 
Theories considering welfare states provide an adequate framework for the understanding the key 

relationships between institutions and social spending and their effects on human welfare and poverty levels. 
In the examination of the relationship between economic growth and welfare, two approaches can be 
distinguished: structural approach which emphasizes the importance of structural -functional factors and the 
political-economic approach which lay emphasis of the roles of political factors in determining the welfare of 
the people in the country.  

In the discussion of welfare, different theories have been offered. They include eco-efficiency theory which 
links economic efficiency with environmental efficiency. The main purpose is to identify and implemen t 
activities to enable production that is both economically more efficient and cleaner in order to create more 
values in the society (Daly, 1992). Eco-efficiency emphasizes on how to help individuals, companies, 
governments or other organizations in the society become more sustainable. It brings together the essential 
ingredients of economic and ecological progress which are necessary for economic prosperity to increase with 
more efficient use of resources without compromising environmental sustainability. But in the discussion of 
sustainability, indicators are essential in illustrating to policymakers and the public alike the relationship and 
trade-offs among the dimensions of sustainable development. However, capturing the dynamics of sustainable 
development and presenting them in terms of measurement indicators that could be unambiguously 
interpreted and easily communicated to policymakers for public policies remain a challenging task (WCED, 
1987, Verfaillie and Bidwell, 2000). 

There is also the traditional welfare theory designed to uncover the paradigm that lies behind traditional 
welfare theory to evaluate the further usefulness of that paradigm. It also assesses undercurrents within 
traditional welfare theory showing how they elucidate essential features of the underlying paradigm. With 
these goals, emphasis was further shift to the classical utilitarianism, neoclassical welfare theory and modern 
formulation of welfare. Utilitarianism and their critics argue that the greatest happiness criterion must 
subsume all other notions of social good. The essence of neoclassical welfare theory is that the performance of 
economic institutions can and should be judged according to whether they provide economic goods in 
quantities that accord with people's relative desires for those goods.  

Well-being has been widely viewed as one of the most important aspects of people´s lives both as 
individuals and as societies. However, despite unprecedented growth being experienced by some developing 
countries in the last decade, people do not necessarily feel better. As enunciated by Brekke and Howarth 
(2002). well-being which is often associated with happiness or satisfaction of life, is about having meaningful 
and worthwhile life, able to fulfill potentials. The discussion of well-being also draws on several reviews of 
literature, including Dally, (1992), Sen (1999), Stymne and Jackson (2000), Sardar, Islam and Clarke (2002), 
Lawn (2005), Schneider, Kallis and Martinez-Alier (2010), Posner and Costanza (2011), Fleurbaey (2015).  
While a number of countries and international organizations have already used (or are in the process of setting 
up) some measures of well-being, currently no nation or organization regularly and systematically collects a 
full spectrum of measures of subjective well-being. This state of affairs has led several researchers and to 
express the need for developing and systematically using national accounts of well -being in recent years 
(Sardar, Islam and Clarke, 2002, Posner and Costanza 2011). Fleurbaey (2015) also argued that countries 
should create ongoing assessments of well-being to complement existing economic indicators such as gross 
domestic product GDP, savings rates, consumer confidence and social indicators like crime rates, longevity; 
infant mortality rates which can help improve the quality of life in societies. 

Discussions of well-being seek to consider other dimensions such as people’s perceptions of social well -
being or national quality of life; patterns and trends in physical and mental health; and alternative measures of 
progress. It is also concerned with how different qualities such as people’s social welfare and social reforms, 
structure of economy, fiscal and structural reforms, innovation, research, innovative activities and coordination 
of industrial policies and transition to a socio-ecological model in the future affect personal and social well-
being and influence territorial intelligence. 

Wills and Ng (2012) carried out theoretical study on welfare economics and sustainable development and  
found that welfare maximization does not necessarily imply sustainable development, and sustainable 
development does not imply welfare maximization. However, welfare maximization requires sustainable 
development; sustainable development is necessary though not sufficient for welfare maximization. In this 
regard, the Organization for Economic Cooperation and Development (OECD) (2015) therefore posit that 
governments should lay much emphasis on all aspects of welfare: economic, environmental and social that 
would go a long way in promoting economic growth of a country. But Cracolici et al (2009) presented a 
different analytical framework for assessing spatial disparities among countries. The study combined economic 
and non-economic aspects of a country’s performance in an integrated logical framework using simultaneous 
equation models.  One of the interesting finding is the inability of most countries to turn higher education 



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skills acquired by the citizens into greater economic performance over time. The study is of the view that 
accurate policies aiming at environmental care is highly desirable. 

Ogboru and Anga (2015) adopted a theoretical approach in the evaluation of the effects of environmental 
degradation on Nigeria and its implication for sustainable economic development. The paper submitted that 
Nigeria has a national development policy objective of achieving rapid economic growth and improvement in 
individual welfare on a sustainable basis, economic instruments and incentives are required to propel this  
development process in the desired direction. Awan (2015) examined the relationship between environment 
and sustainable economic development and found that both developed and developing countries are 
responsible for environmental hazards as developed countries are using excessive resources to produce surplus 
goods for export while poor countries re exploiting their existing resources to feed their growing population 
and end poverty level. 

Gowdy (2015) carried out a seminal work on the new welfare economics for sustainability. He emphasized 
the debate that has been going on over various definitions of sustainability which have been conducted within 
the framework of traditional welfare economics. He posited that equating per capita consumption with welfare 
contradicts empirical evidence suggesting that the link between happiness and wealth/income is relatively 
weak. He therefore concludes by saying that alternative approaches to measuring well -being are being 
developed and these have great potential to move the sustainability debate forward. Mazumdar (2010) found 
evidence that in the middle and low-income countries there is one-way causal relationship between the two 
phenomena, but only up to a certain level of income, after which growth and human development move 
independently. The results, as highlighted by the author, vary with respect to both the three different 
indicators of human development and the different income level clusters. In particular, for the low and middle -
income countries human development precedes economic growth, that is, low social development implies low 
labour productivity and in turn low income. 
 

4. Results 
 

Table-1. LLC Group Unit Root Test. 

 Order of integration LLC t-Statistic Probability Conclusion 
I(0) 1.21746 0.8883 Non-stationaryat level 
I(1) 2.43837 0.9926 Non-stationary at first difference 

I(2) 11.4068 0.0000 Stationary at second difference 
 

Table-2. Johansen’s Test for Cointegration. 

Hypothesized No. of CE(s)  Eigenvalue Trace Statistic Critical values. Probability 
None *  0.513272 118.9584 95.75366 0.0005 

At most 1 * 0.313170 72.15525 69.81889 0.0322 
At most 2   0.280718 47.73682 47.85613 0.0513 

At most 3  0.218897 26.31923 29.79707 0.1194 
At most 4 0.120742 10.26107 15.49471 0.2512 
At most 5 0.028764 1.897079 3.841466 0.1684 

 
Table-3. Johansen Cointegratiom test for economic growth and the environmental welfare determinants. 

Hypothesized No. of CE(s)  Eigenvalue Trace Statistic 0.05 Critical values. Probability 

None   0.224980 28.66103 29.79707 0.0672 
At most 1  0.128195 12.09468 15.49471 0.1524 
At most 2   0.047907 3.177367 3.841466 0.0747 

 
Table-4. Regression Results. 

Variables Coefficient t-statistic  Probability 

  C 23.66019 8.4124 0.0000 
LnQPCI 0.931475 11.8393 0.0000 

QCO2E -0.001128 -0.4099 0.6833 
QGEE -6.006190 -1.9868 0.0514 
QNOE -0.000360 -1.4097 0.1636 

QPCHE 0.002361 2.7671 0.0074 

   
5. Discussion 

The result in the table above table reveals the result of the Levin, Lin and Chu unit root test for multiple 
series, also employed in panel unit root testing. The results shows that as a group, the variables are neither 
stationary at level form nor at first difference. However, at the second difference, the variables become 
stationary. It is important to note that this result is expected, since most macro-economic and environmental 
time-series data are known to be non-stationary at level form, except for very cases where it occurs. Since some 



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of our variables are non-stationary (i.e., at level form), we go further to carry out co integration test. The 
essence is to show that; although our variables are non-stationary series, the variables have a long term 
relationship or equilibrium between them. That is, the variables are co integrated. In Table 2, the Johansen test 
for co-integration has not returned a full rank because the probabilities of all the hypothesized cointegrated 
equations are not less than 0.05. Therefore, we make our conclusion using the first hypothesis that none of the 
variables are cointegrated. Since the probability there is less than 0.05, we actually reject the hypothesis and 
therefore conclude that there is cointegration or long-run relationship among the exogenous variables as well 
as between them and the independent variable. Next, we will now check for the long-run relationship or the 
cointegration between our dependent variable and the environmental welfare determinants 

In Table 3, as a contrast to a full rank which signifies that there is no cointegration between the dependent 
and the independent variables, we have a zero rank, which then implies that there is a long-run relationship 
between economic growth and the environmental welfare determinants. 

The result presented in Table 4 reveal that as at the first quarter of 1999, i.e. at the beginning of this 
study, the Gross Domestic Product was about #18.86 billion. Furthermore, over the quarterly period of 1999:1 
to 2016:4, a #1 increase in per capita income leads to an overall increase in GDP to the tune of N0.93 billion. 
Now, still within the period under study, a 1% increase in carbon dioxide emission in Nigeria reduced GDP 
growth rate by 0.11%. Also, still in the period under study, a 1% increase in quarterly government education 
expenditure shows a very high degree of negative responsiveness by economic growth by 6.0. Furthermore, a 
1% increase in the nitrous oxide emission in the environment leads to a decline in the quarterly GDP growth 
rate by about 0.04%. Finally, still within the quarterly period of 1999:1 to 2016:4, a 1% increase in per capita 
health expenditure of government on the citizens of the country increases the growth rate of GDP by about 
0.24%. This suggests that any attempt at increasing emissions in Nigeria will lead to a reduction in the 
environmental welfare as growth and other development indicators will be affected  negatively. Also, since 
government education expenditure has a negative relationship with economic growth, there is a diversion of 
fund meant for education. Thus, further increase in expenditure on health and education should be closely 
monitored. 
 

6. Conclusion 
This study analyzed the relationship between economic growth and welfare in Nigeria and found hat 

essentially, there are a number of problems with the economic growth strategy. First, although economic 
growth is necessary for poverty reduction it is not sufficient, as growth alone cannot overcome the entire 
important factors that contribute to poverty.  Although, in general, policies fostering economic growth 
facilitate poverty reduction, some types of growth clearly do not clearly improve welfare. Beside, the benefits 
of growth have often been concentrated, contrary to the need of them to be widely shared for growth to have 
the greater impact on the people. In view of the findings, there should be radical change of the economic 
system through restructuring, improving the social environment and abilities of the poor, investing in basic 
and technical education to raise the supply of skilled labour, improving social health care, encouragement of 
good governance. The governments can directly help those in need especially the vulnerable and most at risk, 
such as the elderly and people with disabilities in terms of monetary or food aid.  
 

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