Unemployment rate, clean energy, and ecological footprint in OECD countries.

Abstract

OECD countries have encountered the challenges of improving the environmental sustainability while maintaining economic growth by not impairing employment. This study attempts to reexamine the environmental Kuznets curve (EKC) hypothesis by using ecological footprint as an indicator of environmental degradation. Besides, our study aims to test the validity of environmental Phillips curve (EPC) and role of clean energy on ecological footprint. Our data cover a panel of 36 OECD countries from 1995 to 2015. We adopt the second-generation panel unit root and cointegration test to account for the presence of cross-section dependence (CSD). Moreover, the long-run relationship is estimated using Common Correlated Effect Mean Group (CCEMG) and Augmented Mean Group (AMG) that are robust to CSD. Our findings reveal that the EKC hypothesis is not valid while EPC is confirmed in OECD countries. Though there is a trade-off between unemployment and environmental degradation in OECD countries, the development of new technologies, especially in the clean energy sector, could be a key factor contributing to sustainable growth and better environmental quality. Thus, it is recommended that OECD countries should focus on the development of innovative green technologies and strengthen the initiatives that promote renewable energy consumption.