4.2 Article

Economic Complexity and Environmental Performance: Evidence from a World Sample

Journal

ENVIRONMENTAL MODELING & ASSESSMENT
Volume 26, Issue 3, Pages 251-270

Publisher

SPRINGER
DOI: 10.1007/s10666-021-09750-0

Keywords

Economic complexity; Environmental performance; Pollution; CO2 emissions

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The study finds that increasing economic complexity leads to better environmental performance overall, but has a negative impact on air quality.
In this paper, we analyze the relationship between economic complexity and environmental performance using annual data on 88 developed and developing countries for the period of 2002-2012. We use the Economic Complexity Index, which links a country's productive structure with the amount of knowledge and know-how embodied in the goods it produces, and the Environmental Performance Index as a measure of environmental performance. We show that moving to higher levels of economic complexity leads to better overall environmental performance, which means that sophistication of exported products does not induce environmental degradation. Nevertheless, we find that the effect of economic complexity on air quality is negative, i.e., exposure to PM2.5, CO2, methane and nitrous oxide emissions increases, and these findings are robust across alternative econometric specifications.

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