Economic complexity and environmental degradation: Evidence from OECD countries

Abstract

We augment the existing knowledge on the role of economic complexity in the environment and sustainable development debate by examining the effect of economic complexity on environmental degradation (measured by ecological footprint, CO 2 emissions, N 2 O emissions and greenhouse gas emissions) contingent on income, using data from 35 OECD countries between 1998 and 2017. With the fixed effects model estimator, we find that income facilitates economic complexity to mitigate ecological footprint, CO 2 emissions, N 2 O emissions and greenhouse gas emissions. Also, we fit a partial linear functional-coefficient model to find that income influences economic complexity to exert a nonlinear effect on ecological footprint, CO 2 emissions, N 2 O emissions and greenhouse gas emissions. We find that economic complexity leads to an increase in ecological footprint, CO 2 emissions, N 2 O emissions and greenhouse gas emissions at lower income levels but gradually dampens them as income rises. Finally, by applying the Method of Moments Quantile regression to control for distributional heterogeneity, we also find that the mitigating effect of economic complexity on ecological footprint, CO 2 emissions, N 2 O emissions and greenhouse gas emissions is transmitted through income across quantiles. The policy implications are discussed.

Does economic complexity help in achieving environmental sustainability? New empirical evidence from N-11 countries

“…Based on this, it can be conjectured that economic complexity ensured environmental sustainability. The negative relationship between ECI and underlying proxies of environmental sustainability is in line with the findings of recent studies conducted by Romero and Gramkow [ 1 ], and Aluko et al, [ 10 ]. In addition, it was observed the dynamic impact (both positive and negative) of other variables including financial sector development, economic growth and energy imports on CO 2 and GHG emissions.…”

“…Therefore, it is necessary to build a strong foundation of economic complexity for mitigating the emissions of such gasses. Some recent studies have proposed the negative relationship between ECC and particular emissions of either CO 2 or GHG into the air [ 9 , 10 ]. However, the frequency of studies exploring the joint objective of the impact of ECC on environmental sustainability is very low.…”

Are the circular economy initiatives achievable through digitalization, technological advancements, and renewable energy

“…The empirical results depict that, in the long run, a positive shock in economic complexity is positively related to ecological footprints, at the 1% significance level, whereas negative shocks of economic complexity are insignificant and show no impact towards ecological hazards. This positive relationship is justified by other researchers such as Aluko et al (2022), Arnaut and Dada (2022), Khezri et al (2022), Sarwar, Alsaggaf, et al (2019), Sarwar, Shahzad, et al (2019) but in contrast to Z. Ahmed et al (2022), Murshed et al (2022). Digitalization as important variables is divided into digital economy and digital infrastructure, indicates by achieved results that a 1% positive shock in digital economy variable increases ecological footprint by 0.118%, but negative shock shows no relationship with ecological footprints.…”

“…However, the countries increase economic complexity may effect in environmental deprivation due to increased production and demand for energy. Aluko et al (2022) measured environment as ecological footprint, CO 2 emissions, N 2 O emissions, and greenhouse gas emissions and used 35 OECD countries from 1998 and 2017 by categorizing into income levels. They resulted economic complexity leads to an upsurge in ecological footprint, CO 2 emissions, N 2 O emissions, and greenhouse gas emissions at lesser income levels but gradually reduces them as income increases.…”

The roadmap to net‐zero emission: Do geopolitical risk and energy transition matter?

“…Although the environmental economics literature is flooded with studies on the determinants of environmental degradation/emissions, the focus has mainly been on economic growth, FDI, trade openness, and energy consumption (Apergis & Ozturk, 2015; Aluko, Opoku & Acheampong et al, 2022; Awaworyi et al, 2018; Cole, 2004; Dinda, 2004; Eskeland & Harrison, 2003; He, 2006; He & Richard, 2010; Kearsley & Riddel, 2010; Maddison, 2006; Singhania & Saini, 2021). Analysis of geopolitical risks in this context has started gaining attention in recent years (Anser, Syed, & Apergis, 2021; Riti et al, 2022; Sweidan, 2022).…”