The Role of Labor Productivity in Reducing Carbon Emission Utilizing the Method of Moments Quantile Regression: Evidence from Top 40 Emitter Countries

Global warming has become one of the most serious world-challenging issues nowadays, and much effort is being done to combat its consequences. Therefore, studying the trade-off between carbon emissions and economic activity remains an attractive subject for researchers. In this study, the environmental Kuznets curve (EKC) hypothesis is adopted to verify the trade-off between carbon dioxide emissions per capita and labor productivity in the top 40 emitter countries. Accordingly, a panel data from the top 40 emitter countries is employed from 1992 to 2018, and the novel method of moments quantile regression (MMQREG) is used to analyze the nexus among the variables. In addition, four robustness tests were used to validate the initial results. The findings reveal evidence for the N-shape EKC in the top 40 emitter countries. This indicates that economic growth initially will improve environmental quality up to a certain labor productivity level. However, after reaching a certain turning point, per capita CO2 emission began to fall with rising labor productivity up to the second tipping point, and then, a subsequent phase of deterioration. Heterogeneous characteristics are, however, detected over the N-shape EKC. Like the conclusion reached from the MMQREG, the pooled ordinary least squares (POLS), the fixed-effects (FE), the random-effects (RE), and the fully modified ordinary least squares (FMOLS) all confirmed the existence of the N-shape hypothesis.