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.