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The Relationship between Economic Complexity, Energy Consumption Structure and Greenhouse Gas Emission: Heterogeneous Panel Evidence from the EU Countries

Olimpia Neagu () and Mircea Constantin Teodoru ()
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Olimpia Neagu: “Vasile Goldis” Western University of Arad, Arad 310002, Romania
Mircea Constantin Teodoru: “Vasile Goldis” Western University of Arad, Arad 310002, Romania

Sustainability, 2019, vol. 11, issue 2, 1-29

Abstract: The aim of the paper is to examine the long-term relationship between economic complexity, energy consumption structure, and greenhouse gas emission, within a panel of European Union countries and two subpanels: (i) European economies with higher economic complexity and (ii) European economies with a lower level of economic complexity. Taking into consideration the heterogeneity among European countries, the heterogeneous panel technique is used, including panel estimation through fully modified least squares (FMOLS) and dynamic ordinary least squares (DOLS). The empirical findings indicate a long-term equilibrium relationship between economic complexity, energy consumption structure and greenhouse gas emission within all three panels. Economic complexity and energy consumption structure have a statistically significant impact on greenhouse gas emission within all panels, but the influence is higher within the subpanel of countries with a lower level of economic complexity, suggesting a higher risk of pollution as the economic complexity grows and as the energy balance inclines in favor of non-renewable energy consumption. Our paper suggests that the economic complexity is a variable that must be taken into consideration when national economic and energy policies are shaped. Finally, policy implications for each panel of countries are discussed.

Keywords: greenhouse gas emission; economic complexity; energy consumption structure; heterogeneous panel analysis (search for similar items in EconPapers)
JEL-codes: Q Q0 Q2 Q3 Q5 Q56 O13 (search for similar items in EconPapers)
Date: 2019
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