Investigating the nexus between economic complexity and energy-related environmental risks in the USA: Empirical evidence from a novel multivariate quantile-on-quantile regression

Abstract

This study uses the economic complexity index to examine how knowledge accumulation and its uses affect energy-related environmental risks in the USA over the period 1995:Q1–2020:Q4. To this end, we extend the traditional bivariate Quantile-on-Quantile Regression to the multivariate case. The empirical results provide time-varying effects of economic complexity, economic growth, FDI, trade openness, and urbanization on energy-related environmental risks. Particularly, the effect of economic complexity is negative and weak in the extremely lower quantiles of energy-related environmental risks, while it is positive and stronger in the middle and higher quantiles. The implication of these results is that economic complexity only condenses energy-related environmental risks when such environmental risks caused by energy-related factors are extremely low. Furthermore, economic growth and tradeopenness stimulate energy-related environmental risks but the effects of FDI and urbanization reduce energy-related environmental risks. Therefore, these findings provide insights into achieving environmental sustainability targets in the USA.