An empirical assessment on the leveraging evidence of economic complexity under environmental kuznets curve hypothesis: A comparative analysis between Nordic and Non-Nordic European countries

Abstract

This study empirically investigates the existence or not of Environmental Kuznets Curve (EKC) hypothesis in Nordic and Non-Nordic European countries, with carbon dioxide emissions (and ecological footprint for robustness tests) as proxy of environmental quality. The data are spanning from the years 2005–2019 and covering 22 countries. Using the Gross National Income per capita as measure of economic growth, we show on one hand as first contribution that initially, EKC hypothesis is significantly not valid in the full sample. Interestingly, when taking the Economic Complexity into account, our results show evidence of a consistent leveraging effect that changes the U-Shaped into an inverted U-Shaped structure. As second contribution, a step forward into our results with quantile analysis shows evidence of a significant countries’ threshold effect only in median and upper quantiles where the EKC hypothesis is confirmed. On the other hand, a first disaggregation of the sample into Nordic and Non-Nordic European countries, show no evidence of EKC structure among the two sub-groups. Nevertheless, a further disaggregation based on Euro zone currency criteria, show as third contribution that Euro zone countries are characterized by a U-Shaped structure whether Nordic or Non-Nordic, contrary to an inverted U-Shaped structure for Non-Nordic countries belonging to Non-Euro zone. Policy implications are discussed.