CHAPTER THREE

RESEARCH METHODOLOGY

3 .0 Introduction

This chapter present the methodology adopted in conducting research. The methodology

adopted which is regression analysis is aimed at helping to solve the problem of the study, also

described the method of data analysis and identifies the variables of interest.

3.1 Sample size and Sampling Technique-

According to winner and Aorninick (1987) sample size is a sub set of population that is

representing the entire population. Therefore, the sample size of this study constitute of some

evidences of the effect of C02emission and energy intensity on sustainable development in

Nigeria. The sample size ranges from 1990 -2021 covering a period of 31 years which the

sample size is adequate for the research. Non probability sampling is applied in selecting the

sample.

3.2 Variables Measurement and Definition

Serial Number Variable Name Code Measurement Studies

1 Sustainable SD It measured the Meleke et al

Development social (2021)

wellbeing/welfare Ajakaiye et al

of the society (2014)

 Igbionasa et al

(2017)

2 C02 Emissions CE Its measures in Alam et al

metric tones or (2011)

kilo tonnes Zhou et al

(2005)

Yumashev et

al(2029)

3 Energy Intensity EI It determines how Arouri et al

energy is (2012)

converted into Zhan et al

GDP it measured (2004)

as Joules per Khan et al

USD (2013)

4 Population POP G It measures the Taylor et al

Growth percentage rate at (2007)

which the country Kendal et al

population (2004)

growth

5 GDP Percapita GDPpc It measures the Das et al (2004)

individual share Duillien et al

in GDP of a (2010)

country Nnaji et al
 (2013)

6 Industrial out put IND OP It measures the Patrick et al

output of (1984)
businesses Akambi et al
integrated in (2009)
industrial sector Awoloja et al
of the economy (2007)
such as
manufacturing,
inning and
Utilities
Sources; Author’s initiative.

Sustainable development is the development that meets the need of the present without

compromising the ability of future generation to meet their own needs. Sustainable development

is an organizing principle for meeting human development goal while simultaneously sustaining

the ability of natural system to provide natural resources and ecosystem services on which

economy and society depend. (Corlees, 2018)

Carbon Emissions: Mann (2021) Define green-house gas emission; as any gas that has property

of absorbing infrared radiation (net heat energy) Emitted from earth surface and re radiating it

back to earth surface, thus contributing to the green-house effect

Energy Intensity: Corless (2018) define energy intensity as measure of energy efficiency of an

economy. It’s calculated as unit of energy per unit of GDP. Higher energy intensity indicates a

higher price or cost of converting energy into GDP. Low energy intensity indicates lower price

or cost of converting energy into GDP.

Population Growth: Pimentel (2018) define population Growth as the increase in the number

of people in a population or dispersed group. It also refers to change in the size of a population

positively.
GDP percapita: Wade (20180 define GDP percapita as the total monetary value of all goods

and services produced in a country by the entire resident of the country that is GDP divide by the

total population of the country in a year. That is individual share in GDP.

Because it directly relates to the study and it can be easily uses to explains the finding of the

study

Industrial Output; Ozughalu(2016) Industrial output is important for the growth of an

economy, and also for long-run reduction of poverty. Its strategies have remarkable impacts of

great benefit to the poor. Industrial output contributes greatly by helping an economy achieve a

variety of social objectives such as; poverty eradication, full employment, gender equality and

better improvement and access to healthcare and education. It has been observed that industrial

processes carries alongside some negative externalities such as environmental hazards which

includes; air and water pollution, extinction of species, climatic changes, loss of natural

resources etc. These threaten the global environment as well as economic and social welfare.

Ekpo (2014) Nigeria industrial production it measures the output of businesses integrated in

industrial sector of the economy such as manufacturing, mining and utilities. Manufacturing

Refers to the industries belonging to the International Standard Industrial Classification (ISIC)

Division 15-37. Value added is net output of the sector after adding up all output and subtracting

Intermediate Inputs. Its calculated without making deduction for depreciation of fabricated

Assets or depletion or Degradation of natural resources. Adewomi(2005) The origin of Value

added is determined by (ISIC) Revision 3. Data are in current U S Dollars.

3.3 Source of Data Collection

To get adequate, accurate and relevant information for this research work, data for study is of

time series in nature and is from secondary sources. The data is drive from international energy

agency (I E A) and the World Bank data portal.

3.4 Model Specification

The econometric techniques adopted in this study take Energy intensity and carbon (CO2)

Emissions as explanatory and independent variables. While sustainable development as

dependant variable and also population growth and GDP per capita as control variables .and are

used to obtain a reliable parameters estimate in the time series regression. Therefore, the model

specification is written as follows;

Mathematical Model is

SD =ƒ (CE+EI+POPG+GDPp+IND OP)

Econometric Model is

SD=ƒ (βO+β1CE+β2EI+β3GDPpc+β4P0P G+β5IND OP+µ)

Where

SD is sustainable development

β0, β1, β2, β3, β4 β5 are parameters of the variables captured in the model

CE is carbon emission

POPG is population growth

GDPpc is GDPpercapita

EI is energy intensity

IND OP is industrial output and

µ is error term.

Adopting a log linear specification taking the natural logarithm of both side of the equation and

assuming a linearity among the variables gives

Log SD =β0+β1logEI+β2logCE+β3logPOP G+β4logGDPpc+β5logIND OP+µ

A priori expectation; the expected sign of the coefficients of the explanatory variables are

β1>0, β2>0, β3>0, β4>0β5>0

The dependent variable is sustainable development, which depend on independent variables

theCO2 Emissions and Energy intensity. While population growth, GDP percapita and Industrial

Output are control variables. And also population growth is the component and determinant of

CO2 Emissions.

While GDP percapita and Industrial Output is the components and determinant factors of

sustainable development.

3 .5 Technique of Data Analysis

The study employs the Autoregressive Distributed Lag (ARDL) Bound test approach developed

by Peasant et al (2001) to examine the nexus between the variables. Reasons for choosing ARDL

technique is its comparative advantage over other methods of testing co integration. As stated by
Emran et al (2007) and Menyah and Woude-Rufael (2010) the Monte Carlo evidence shows that

it has several important advantage over other conventional method which include correcting the

possible endogeniety of explanatory variables, good properties for small sample, estimation does

not require unit root test as its not affected by order of integration of the variables. And also it

allows both long run and short run model to be estimated simultaneously.

Other reasons behind the choice of this approach are: first ARDL can be applied irrespective of

whether the variables are stationary at level I (0) or at first difference I (1) or combination of

both. Secondly, it can generate robust and reliable result even if the number of the observations

is small or large.

Finally, it produces unbiased result of the long run as well as a valid f-statistics even if when

some of the repressors are endogenous. (Abubakar and Ya,aba 2014)

The ARDL model for the study is specified as:

ΔSDt = β0 + 1ΔLCEt-1 + 2ΔLEIt-1 + 3ΔLPOP Gt-1 +4ΔLGDPp + 5ΔLIND OP+ α1LCEt-1 + α2LEIt-1+

α3LPOP Gt-1 +α4LGDPpt-1 + α5LIND OPt-1+ µt……………….. (1)

Where β0 to β5 and α1 to α5 are the parameters of the explanatory variables. Moreover, the Error

Correction Model of the ARDL approach is specified as:

ΔSDt = β0 + 1ΔLCEt-1 + 2ΔLEIt-1 + 3ΔLPOPGt-1 +4ΔLGDPpt-1 + 5ΔLINDOPt-1+µt…………………..

(2)

The ARDL model is structured into two; the first part of the equation with β 0 to β4 represent the

short run dynamics of the model, while the coefficient α 1 to α4 represent the long run
relationship. The null hypothesis of the above model is defined as H 0: α1 = α2 =α3 =α4= α5=0 which

tells us that there is no co-integration among the variables under measurement.

3.6 Diagnostic Tests

3.6.1 Unit Root Test

Augmented Dickey Fuller test (ADF), test the null hypothesis that a unit root is present in a time

series sample. The standard Augmented Dickey-Fuller (ADF) test is performed to assess the

degree of integration of the variables. The testing procedure for the ADF test is the same as for

the Dickey – Fuller test, but is applied to the model

Where α is a constant β the coefficient on a time trend and p is the lag order of the autoregressive

process and k measure the length of the lag in the dependent variable and t is the time trend.

3.6.2 Serial Correlation Test

Serial correlation refers to the relationship not between two (or more) different variables, but

between the successive values of the same variables (Koutsoyiannis, 1977). The term

autocorrelation may be defined as “correlation between members of series of observations

ordered in time; as in time series data (Gujarati, 2004). Testing for serial correlation can be used

to detect dynamic misspecification. Breusch-Godfrey Serial Correlation LM Test will be

employed to test whether the variables are serially correlated.

3.6.3 Normality Test

Normality test are used to determine if a data set is well modeled by a normal distribution and to

compute how likely it is for a random variable underlying the data set to be normally distributed.
Some published works recommended the Jarque -Bera normality test, a goodness of fit test, as its

test whether sample data has the skewers and kurtosis matching a normal distribution.

3.6.4 Heteroscedasticity Test

The problem of heteroscedasticity arises as a result of violating one of the assumptions of the

CLRM, homoscedasticity. The existence of heteroscedasticity is a major concern in the

application of regression analysis, as it can invalidate statistical tests of significance that assume

that the modeling errors are uncorrelated and uniform—hence that their variances do not vary

with the effects being modeled. Breusch-Pagan-Godfrey technique will be used to test for

heteroscedasticity.

Greater than the upper bound critical value, the H0 is rejected (the variables are co integrated). If

the F-statistic is below the lower bound critical value, then the H0 cannot be rejected (there is no

co integration among the variables). When the computed F-statistics falls between the lower and

upper bound, then the results are inconclusive. In the meantime, we develop the unrestricted

error correction model (UECM) based on the assumption made by Pesaran et al. (2001). From

the unrestricted error correction model, the long-run elasticity’s are the coefficient of the one

lagged explanatory variable (multiplied with a negative sign) divided by the coefficient of the

one lagged dependent variable.

The ARDL has been chosen since it can be applied for a small sample size, and can be also

estimate the short and long-run dynamic relationship among all the variables used. The ARDL

methodology is relieved of the burden of establishing the order of integration amongst the

variables. Furthermore, it can distinguish dependent and explanatory variables, and allows
testing for the existence of the relationship between the variables. Finally, with ARDL it is

possible that different variables have differing optimal number of lags.