Economic Complexity and Ecological Footprint: Evidence from the Most Complex Economies in the World

Olimpia Neagu

doi:10.3390/su12219031

Abstract

The paper introduces economic complexity as an explanatory variable of ecological footprint change, along with income per capita and fossil fuel energy consumption. The link between the ecological footprint and economic complexity is explored within a panel of 48 complex economies over the period 1995–2014. The panel analysis is based on the annual data series of the economic complexity index (ECI), fossil fuel energy consumption, income per capita, and the ecological footprint of production. The econometrical analysis, based on second-generation unit root tests, cointegration testing, and estimation of fully modified ordinary square (FMOLS) and dynamic ordinary least square (DOLS) models in a heterogeneous panel of countries, revealed a validated positive long-run association between the ecological footprint of production as dependent variable and the economic complexity index, gross domestic product per capita, and fossil fuel energy consumption. The paper sheds light on the critical situation of environmental sustainability, taking into consideration that 75% of countries under examination are in ecological deficit.

Highlights

One of the major challenges for humanity in this century is to cope with the rising levels of environmental degradation and energy demand while keeping economic growth rates high
The paper intends to highlight the link between the ecological footprint of production and economic complexity by taking into consideration other factors influencing the environment, namely, income per capita and fossil fuel energy consumption, in 48 of the most complex economies in the world over the period 1995–2014
A stable long-run relationship is revealed between the ecological footprint of production and economic complexity, fossil fuel energy consumption and per capita income

Summary

Introduction

One of the major challenges for humanity in this century is to cope with the rising levels of environmental degradation and energy demand while keeping economic growth rates high. The relationship between economic activities, energy consumption, and environmental pollution has been thoroughly studied by different researchers (e.g., [1,2,3,4,5,6,7,8,9,10,11,12,13,14,15,16,17,18,19,20,21,22]), and an extensive and systematic review of such studies is provided by Vaheed et al (2019) [23]. A significant part of the aforementioned studies was focused on providing evidence to support the environmental Kuznets curve (EKC) hypothesis (the inverted U-shaped relationship between air pollutant emissions and income). The impact of economic activities on the environment has several dimensions that cannot be embedded within one measure of environmental degradation

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Conclusion