The evolution of environmental and labor productivity dynamics

Abstract

This paper provides new empirical evidence on delinking in income–environment dynamic relationships for CO2 and air pollutants at the sector level. A panel dataset based on the Italian NAMEA (National Accounting Matrix including Environmental Accounts) over 1990–2007 is analyzed, focusing on both emissions efficiency (EKC model) and total emissions (IPAT model). Results show that, looking at sector evidence, both decoupling and also eventually re-coupling trends could emerge along the path of economic development. The overall performance on greenhouse gases, here CO2, is not compliant with Kyoto targets. SOx and NOx show decreasing patterns, though the shape is affected by some outlier sectors with regard to joint emission-productivity dynamics. Services tend to present stronger delinking patterns across emissions than manufacturing. Trade expansion validates the pollution haven in some cases, but also shows negative signs when only EU15 trade is considered. This may due to technology spillovers and a positive ‘race to the top’ rather than the bottom among EU15 trade partners. General R&D expenditure shows weak correlation with emissions efficiency. SUR estimators (Seemingly Unrelated Regressions) suggest that, as regards manufacturing, the slope varies across sectors. Further research should be directed towards deeper investigation of trade relationship at the sector level and increased research into and efforts to produce specific sectoral data on ‘environmental innovations’.