The Impact of Rapid Urbanization on Poverty Levels in the Context of Climate Change: Empirical Evidence from Somalia

Abstract:
This study investigates the relationship between rapid urbanization and poverty levels in Somalia, employing annual data spanning from 1990 to 2022. The analysis focused on critical variables, including urbanization rates, CO2 emissions as a measure of climate change, and unemployment rates, with poverty quantified by real GDP per capita. A Johansen cointegration approach is utilized to ascertain long-term equilibrium relationships, while a Vector Error Correction Model (VECM) captures short-term dynamics. Results indicate that urbanization exerts a significant positive influence on poverty in the long term; specifically, a 1% increase in urbanization correlates with a 1.73% rise in poverty levels. Additionally, unemployment demonstrates a substantial and statistically significant positive effect, whereby a 1% increase in unemployment results in a 9.64% increase in poverty. In contrast, CO2 emissions were found to be statistically insignificant. The long-run equilibrium adjustment rate is approximately 12.66% per period, suggesting a moderate pace of return to equilibrium. In the short run, the unemployment rate negatively influences poverty, with a coefficient of -2.369508. Furthermore, CO2 emissions exhibit a delayed yet significant positive effect on poverty, indicated by a coefficient of 0.681835. Granger causality tests reveal strong causal relationships between past unemployment rates and future poverty levels, as well as between past urbanization trends and subsequent poverty levels. The findings underscore the necessity for integrated policies that address urbanization, enhance climate resilience, and promote employment, aiming to alleviate poverty in Somalia.
Keywords: Cointegration, Rapid urbanization, CO2 emissions, GDP per capita, Employment, Climate resilience