Economic Complexity, Economic Growth, and CO2 Emissions: A Panel Data Analysis

Abstract

ABSTRACT Reducing global warming effects without jeopardizing economic prosperity demands the analysis of the link between these factors. Environmental degradation and economic growth are thought to be related in a non-linear manner, following an inverted-U pattern called the ‘Environmental Kuznets Curve’ (EKC). Despite the many studies seeking empirical support for this relationship, the literature does not provide conclusive findings. By presenting the Economic Complexity Index (ECI) as an explanatory variable, this paper aims at providing a comprehensive analysis of EKC from 86 countries with different development levels, covering the period between 1971 and 2014. Different statistical estimation techniques were used, including an Adaptive Neuro-Fuzzy Inference System (ANFIS) model, dynamic panel data techniques, and the Sasabuchi–Lind–Mehlum (SLM) test. The results show no clear evidence supporting the idea of EKC, neither for production volumes nor for production sophistication, as captured by ECI. Nonetheless, when ECI increases, pollution levels drop monotonously only for developed countries.