In-depth analysis of the effect of decomposed growth on the environment: A global perspective.

Abstract

The traditional Environmental Kuznets Curve (EKC) theory, which establishes a relationship between economic growth and a select number of pollutants, does not fully capture the broad and nuanced impacts on environmental qualityThis research examines the implications of decomposed economic growth by considering the separate contributions of scale, composition, and technique effects on environmental health and ecosystem vitality. The research spans 121 countries from 2001-2019, using robust statistical methods, including Driscoll-Kraay standard error, fully modified ordinary least squares, and panel quantile estimation techniques. The study reveals complex relationships that depend on countries' income levels. A predominantly positive and non-linear relationship between the scale effect and environmental health is observed for the full sample of countries and for low-income countries. The scale effect also shows a non-linear and predominantly positive relationship with ecosystem vitality in lower-middle-income, upper-middle-income, and high-income countries. The association between the composition effect and environmental health is inverted U-shaped in lower-middle-income countries, while it is mostly negative and non-linear in low-income and high-income countries. For ecosystem vitality, the composition effect shows a negative, non-linear relationship in all sampled countries, but a positive, non-linear relationship in higher-income countries. The relationship between the technology effect and environmental health is largely positive and non-linear in all sampled countries, lower-middle-income countries, upper-middle-income countries, and higher-income countries. However, the relationship is negative in lower-middle-income countries. These results have important policy implications. Governments are encouraged to adopt renewable, sustainable, and low-carbon technologies to address the scale effect. In addition, the formulation and enforcement of stringent environmental regulations for polluting industries is crucial, given the significant impact of the composition effect.