Environmental Kuznets Curve Revisit: Role of Economic Diversity in Environmental Degradation
Abstract Background: Unlike the classical view, a new path of economic growth and development among the emerging and developing nations seems to have distinct impact on environment. Customary patterns of production and consumption have undergone significant changes and the new “growth with non-smoke-staks” has put the developing economies on a path that can change Environmental Kuznets Curve (EKC) fundamentally. With this view, the current study attempts to examine how these growth patterns among developing world have impacted the degradation of environment. We argue that including income per capita and share of manufacturing would not capture the full growth dynamic of developing and emerging countries and therefore it masks the real impacts on environmental degradation. To this end, we introduce the Economic Complexity Index (ECI) to the model to reflect the full impacts of new growth approaches on CO2 emission levels by using a panel data analyses of 100 emerging and developing countries over 1963-2018 period.Results: The results indicate that complexity of the economies of developing and emerging countries has added to the CO2 emission levels in absolute terms but it has helped to reduce the CO2 intensity. Conclusions: The implications of the findings for developing and developed countries could be quite significant. For advanced economies, a downwardly-shifted Kuznets curve implies that, on one hand, technology transfers have been successful in curbing the environmental degradation of developing economies and, on the other hand, the economic transformation strategies of developing world is working in a sustainable way.