Does the environment matter for poverty reduction? the role of soil fertility and vegetation vigor in poverty reduction

The debate on the environment-poverty nexus is inconclusive,
with past research unable to identify the causal
dynamics. This paper uses a unique global panel data set
that links (survey and census derived) poverty data to measures
of environmental quality at the subnational level. The
analysis uses vegetation vigor as a proxy for above-ground
environmental quality and soil fertility as proxy for belowground
environmental quality. Rainfall is used to account
for endogeneity issues in an instrumental variable approach.
This is the first global study using quasi-experimental
methods to uncover to what degree environmental quality
matters for poverty reduction. The paper draws three
main conclusions. (1) The environment matters for poverty
reduction. The panel regression suggests that a 10 percent
increase in vegetation vigor is associated with a poverty
headcount ratio reduction of nearly 0.7 percentage point in
rural areas, and 1 percentage point in Sub-Saharan Africa. A
10 percent increase in soil quality leads to a roughly 2 percentage
point decrease in poverty rates in rural areas and in
Sub-Saharan Africa. (2) The effects of environmental quality
on poverty are stronger than its effects on average income,
suggesting that the poor benefit disproportionately from
environmental quality. (3) In situ environmental quality
improvements are pro-poor, in contrast to urbanization.
Although urbanization has highly significant and sizable
correlations with GDP per capita, it is not significantly
correlated with poverty reduction.