How the economic complexity of a national economy affects the environment

Abstract

PURPOSE: The paper presents an investigation about connection between level of economic complexity and environment development of national economies.

DESIGN/METHODOLOGY/APPROACH: The study is based on the assumption of a significant impact the economic complexity level that might have on the environment, as a high level of industrial knowledge in the country can encourage the introduction of environmentally friendly technologies and contribute to environmental sustainability of the economy in the future. Environmental Performance Index (EPI) was chosen as the dependent variable, while the economic complexity index (ECI) was chosen as the explanatory variable. STATISTICA software package was used to build the correlation and regression models.

FINDINGS: The interpretation of the regression coefficients of the three constructed models confirms that by increasing the economic complexity index per unit it is possible to improve the environmental situation in the country from 5 (2012) to 10 (2014-2016) EPI units. The dynamics of indicators during 2012-2016 shows that the level of correlation of research indicators increases from year to year (0,582, 0,693 and 0,724).

PRACTICAL IMPLICATIONS: In the analyzed period of 2012-2016, the factor of economic complexity of the country has been confirmed by empirical studies conducted on a sample of almost 100 countries to have positive significant impact on the state of the environment.

ORIGINALITY/VALUE: The effect of the economic complexity factor is most likely manifested through the synergy of knowledge about environmentally conscious production technology and environmental awareness of all economic entities. The more diversified the economy, the less likely is a possibility of rent-aimed “state capture”.