Economic growth, economic complexity, and carbon dioxide emissions: The case of Colombia

Abstract

This paper aims to validate the hypothesis of an Environmental Kuznets Curve (EKC) for Colombia, introducing the Economic Complexity Index (ECI) into the analysis as a differentiating element of production volumes. We use a Vector Error Correction Model (VECM) to corroborate if there is a long-term relationship between the variables covering the period between 1971-2014. Also, we test the robustness of the results using three different techniques: Dynamic Least Squares, Fully Modified Least Squares, and Canonical Cointegration Regression. The results show that for a developing country like Colombia, the EKC does not exist, and does not yet benefit from increases in economic complexity. Arguably, the country has several hurdles to overcome before achieving the environmental benefits of increased product sophistication. Some of them could be related to the country's own productive and institutional rigidities, which opens the space for public policy intervention.

Relationship between economic diversification and CO2 emissions: ARDL-EC modeling in South Africa

“…The ARDL-ECM was utilized by authors such as Can, Dogan, and Saboori (2020), Coulibaly and Akia (2017) as well as Laverde-Rojas, Guevara-Fletcher, and Camacho-Murillo (2021). According to Coulibaly and Akia (2017), ARDL distinguishes between endogenous and explanatory variables.…”

“…This is also true for the economies. There is a relationship between economic activities and CO 2 emissions (Laverde-Rojas, Guevara-Fletcher, and Camacho-Murillo 2021). This is due to the fact that industrial production is accompanied by intensive consumption in energy and gas emissions.…”

“…These studies found that product diversification had a positive and significant impact on CO 2 emissions. Several studies have been carried out focusing on the role of economic diversification and complexity in reducing CO 2 emissions (Ferraz et al 2021;Can and Gozgor 2017;Moutinho, Madaleno, and Elheddad 2020;Laverde-Rojas, Guevara-Fletcher, and Camacho-Murillo 2021). Can, Ahmad, and Khan (2021) found that economic complexity promotes CO 2 emissions in a study of 10 newly industrialized countries (NICs) for the period of 1970-2014.…”

“…In France, a study was conducted by Can and Gozgor (2017) for the period of 1964-2014, and highlighted the long-run negative relationship between economic complexity and CO 2 emissions. In a study covering a period of 1971-2014 in Colombia, Laverde-Rojas, Guevara-Fletcher, and Camacho-Murillo (2021) found that the country does not yet benefit from economic complexity in reducing environmental degradation. Ikram et al (2021) found that in Japan, there was a bi-directional relationship between economic complexity and ecological footprint.…”

“…The primary purpose of economic diversification is to improve economic tolerance, alleviating poverty, building resilience against fluctuations in economic activity, job creation, and reducing vulnerability to income loss. It is also a strategy that reduces or enhances exposure and/or adaptation to greenhouse gas (GHG) emissions, such as carbon dioxide (CO 2 ), which have been utilized as proxies for global warming and climate change (Shahzad et al 2020;Laverde-Rojas, Guevara-Fletcher, and Camacho-Murillo 2021). This is due to the heterogeneity of GHG emissions based on sectors of GDP structures.…”