Nexus of Globalization and Environmental Quality: Investigating Heterogeneous Effects through Quantile Regression Analysis

Abstract

This study examines the effects of globalization on environmental quality, explicitly focusing on the scale, technique, and composition aspects proposed by KOF Swiss Economic Institute. A large sample of 115 developed and developing countries is analyzed to understand how different dimensions of globalization impact environmental degradation at various levels, using the quantile regression method. The results indicate that globalization has a positive effect on emissions at lower and middle quantiles, but at the upper quantiles, the effect becomes negative, based on the distribution of CO 2 per capita (CO2PC). Additionally, each dimension of globalization has its influence on emissions: (i) Renewable energy consumption significantly negatively impacts environmental quality across most percentiles, except for the 90 th percentile. (ii) Foreign direct investment inflows positively affect environmental quality at lower quantiles but negatively at higher quantiles. (iii) Urbanization initially correlates negatively with environmental degradation at the 50 th percentile, but this relationship turns positive at the 75 th percentile. Overall, globalization benefits countries facing environmental degradation seriously, while countries maintaining a high quality environment have not benefited much from globalization. These findings offer valuable insights for policymakers in developing effective environmental policies considering diverse economic and environmental conditions across countries.