The Impact of Economic Complexity Index on Greenhouse Gas Emissions in Selected Oil Exporting Countries: A Panel Gentle Transmission Regression (PSTR) Model Approach

Abstract

Reducing greenhouse gas emissions is one of the most important goals of the world’s energy and environmental policies. Even though fossil fuels are one of the most important factors in creating pollution, their role in the structure of production and economic growth cannot be ignored. Nowadays, to measure economic growth, economists do not consider only the amount of production of goods and services, but also consider the structure of production of goods and services in terms of technical knowledge (technology level) used in them. Accordingly, in recent decades, the index of economic complexity has been proposed, and by calculating it the possibility of knowing the development of countries’ levels is provided. The purpose of this study is to investigate the effect of the economic complexity index on greenhouse gas emissions in some oil exporting countries in the period from 1995 to 2019 using the panel smooth transition regression (PSTR) model. The results of the linearity test confirm the existence of a nonlinear relationship between the considered variables. Also, considering a transfer function with a threshold parameter that expresses a two-regime model is sufficient to specify the nonlinear relationship between the model variables. The slope parameter (transition speed) equals 3/1964. The test results indicate that in both regimes (first and second), the economic complexity index has a negative effect on the amount of greenhouse gas emissions

Keywords

• economic complexity index
• greenhouse gases
• panel smooth transition regression models
• energy consumption structure