Technological Spillovers, Manufacturing Growth and Transboundary Pollution in Case of Pakistan

Abstract

Role of technological spillover in manufacturing sector growth and climate change is the running debate in the world to avoid the problem of production inefficiency and environmental damages. Environment friendly technological spillover plays pivotal role in manufacturing sector growth which leads to economic growth. In order to investigate the inconclusiveness of the major issues of production inefficiency and climate change in Pakistan the current research was aimed at finding the relationship between technological spillovers, manufacturing growth and climate change. To meet the objectives, the study investigated both short run and long run dynamics by employing Autoregressive Distributive Lagged (ARDL) model. An annual time series data over the period of 1973 to 2017 was collected for comparative analysis of technological spillover performance in manufacturing sector and environmental condition of the country. The results of CUSM test and Bound test validated the existence of long run co-integration relationship among estimated models. The results demonstrated that technological spillover performs significantly positive role in manufacturing growth with less absorptive ability. The empirical analysis proved that technological spillover and imported technology have affirmative role in reducing amount of net Carbon emission over the long run. It is suggested that the firms should adopt innovative technologies and try to improve absorptive capacity while government must opt country specific policies to control negative externalities.