Analyzing economic growth, eco-innovation, and ecological quality nexus in E-7 countries: accounting for non-linear impacts of urbanization by using a new measure of ecological quality.

Abstract

The rising urban population and accelerated resource consumption pose major environmental challenges. Given that around 75% of global resources are consumed in urban areas, understanding the true association between urbanization (UR) and ecological quality is necessary for better urban strategies. Alongside this, eco-innovation (ECO) can limit environmental pollution and thus, it is the cornerstone of environmental policies. On that note, this research discloses the nexus between eco-innovation, economic growth (EGR), and ecological quality by considering the non-linear effects of UR in the emerging seven (E-7) nations from 1992 to 2018. Unlike previous literature, the newly developed indicator of ecological quality (the load capacity factor (LCF)) is adopted to understand the connection between UR, eco-innovation, and ecological quality since this new comprehensive indicator is based on both biocapacity and ecological footprint (EF). In the methodology, the "Continuously Updated-Fully Modified" (CuP-FM) test is used since this method offers diverse benefits for panel data estimation by accounting for major panel data estimation issues including autocorrelation, endogeneity, heteroscedasticity, fractional integration, and cross-sectional dependence. The empirical estimates unveiled that the current levels as well as high levels of UR limit the LCF. This evidence suggests that UR in the E-7 nations expands ecological degradation. This finding contradicts the assertions of ecological modernization theory that expanding urbanization brings some ecological benefits. Similarly, economic growth alleviates ecological quality. However, eco-innovation and agricultural land (AGL) contribute to enhancing the LCF and promoting ecological quality. Further, UR and eco-innovation Granger cause the LCF. Lastly, comprehensive urban environmental strategies are discussed to promote sustainable urbanization backed by eco-innovation.