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Environmental sustainability through aggregate demand and knowledge economy interaction—a case of very high–HDI countries

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Abstract

The magnitude of the economic activities is immense in very high–Human Development Index (HDI) countries, leading to environmental degradation, a crucial problem. This study is aimed at testing aggregate demand’s role in the environmental Kuznets curve (EKC) perspective and explores the role of four pillars of the knowledge economy, viz., technology, innovations, education, and institutions, as proposed by World Bank, in maintaining sustainable development of environmental quality in these countries. The analysis covers the period ranging from 1995 to 2022. The departure of normality of the variables provides a solid base for panel quantile regression (PQR). Unlike ordinary least squares (OLS) regression, which estimates the conditional mean of the dependent variable, PQR estimates the conditional quantiles. The estimated results using PQR confirm both U and inverted U-shaped aggregate demand–based EKC. In fact, these knowledge pillars in the model determine the shape of EKC. Results also reveal that two knowledge pillars, i.e., technology and innovations, are responsible for significantly reducing carbon emissions. In comparison, education and institutions are responsible for expanding carbon emissions. As a moderator, all knowledge pillars except institutions are shifting the EKC downward. The key lessons from these findings are that technology and innovation can reduce carbon emissions, while education and institutions may have a mixed impact. The relationship between knowledge pillars and emissions may be moderated by other factors, underscoring the need for further research. Moreover, urbanization, energy intensity, financial development, and trade openness significantly contribute to environmental deterioration.

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The data sources of variables are mentioned in the “Variables and theoretical model” section.

Notes

  1. https://worldpopulationreview.com/country-rankings/co2-emissions-by-country

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  1. Department of Economics and Statistics, School of Management, University of Management and Technology, Dr Hasan Murad, Lahore, Pakistan

    Mubasher Iqbal & Rukhsana Kalim

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Mubasher Iqbal’s contribution is 50%. He contributed in methodology, model development, estimation, analysis, and conclusion. Dr. Rukhsana Kalim also contributed 50%. She worked on abstract, introduction, and literature review. She, in the end, reviewed the whole document as well.

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Table 5

Table 5 Very high–HDI country list
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Iqbal, M., Kalim, R. Environmental sustainability through aggregate demand and knowledge economy interaction—a case of very high–HDI countries. Environ Sci Pollut Res 30, 70229–70245 (2023). https://doi.org/10.1007/s11356-023-27220-w

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