In the existing environmental economics literature, there have been numerous empirical studies related to environmental Kuznets curve (EKC) since the early work of Grossman and Krueger (1991), where this model has been verified in many developing as well as in developed countries through applying miscellaneous econometric methods and techniques. The relationship between economic growth and environment has been investigated by applying times-series and panel data with different others important control variables that contains international trade/trade openness (Khan et al., 2020a), foreign direct investment (Pao and Tsai, 2011), economic development and tourism management (Zaman et al., 2016), demand and price of energy (renewable and non-renewable energy) (Richmond and Kaufmann, 2006) innovation and renewable energy (Khan et al., 2020b), ICT and real income (Danish, 2019), ICT and human capital (Haini, 2021), ICT and innovation (Nguyen et al., 2020). While many empirical studies incorporated ecological pressure measures like biodiversity and deforestation, while some of these results studies based on carbon emissions to assess the actual quality of the environment. Nevertheless, as the carbon dioxide emission might not be a good measure for the exploitation of our ecosystem and cave, while concentrating only on greenhouse gas emissions declines the validity of findings.
In the recent existing literature of environmental economics, some empirical studies have utilized EcoFP as a measure environmental sustainability. EcoFP, supports us to well recognize both direct and indirect effect consumptions and production on the environment (Khan and Yahong, 2022; Khan et al., 2022a; Khan et al., 2022b). After the empirical work of Rees and Wackernagel (1996), EcoFP (as a measure of environmental quality) has been utilized in many empirical papers related environmental economics. This measure of environmental sustainability has becoming novel scientific evidence of ecology while it measures the quality of environment in the framework of six productive surface areas’ components (Huang et al., 2022). Few empirical studies examining the long-run association between EcoFP and economic growth for different countries. Economic growth effect environmental sustainability through few technical channels; For instance, Baloch et al. (2019) revealed that real income growth within the Scale-effect (S-E) deteriorate environmental sustainability, changing technological structure and compromising economy structure. Secondly, the Composition-Effect (C-E) reduces the detrimental effects of real income growth via economic structure change. Lastly, the Techniques-Effect (T-E) increase environmental sustainability due to environmentally-friendly technologies and implementation of mitigation policy (Destek and Sarkodie, 2019). The dominant role of C-E and T-E over S-E lead to the establishment of an inverted-U or EKC-hypothesis between economic growth and environmental quality. This phenomenon is examined again and again; while some studies tested and verified the establishment of EKC-hypothesis (Khan et al., 2022a) for G-seven economies, (Baloch and Wang, 2019) for BRICS countries, and (Huang et al., 2022) for E-seven and G-seven groups of countries, however, the empirical work of (Amri et al., 2019) in the context of Tunisian economy (Alshehry and Belloumi, 2017) for Saudi Arabia have fail to confirmed the EKC-hypothesis between economic growth and Environment.
However, in this era of digitalization, the significance of ICT and ECI on development has been broadly deliberated in last few years. According to Schumpeter (1942) and initial definition, the process of industrialization, will substitute the low and incompetent economic sectors (private or business sector) with advance and modern sector. Therefore, the emerging of ICT and ECI contributes positively in the process of sustainable economic growth and development. These two important measures play its positive role to development of economies in three main ways. (i) they minimize the production costs via providing low or no costs of transaction and better system for communication (e.g., online buying and selling or E-commerce) Ozcan and Apergis (2018). (ii) they expand the business sector (both agriculture sector and industrial sector) with more skillful and knowledgeable production. (iii) ICT and ECI transformed all resources especially, financial resources (such as irrevocable guarantees, irrevocable lines of credit, and liquid assists) to more active stakeholders and encourage financial inclusion (Moyer and Hughes, 2012). Nevertheless, the impact of ICT and ECI on environment have been broadly argued in the existing literature of environmental economics. But some studies stated that the emerging of ICT and ECI is more detrimental than other machines and equipment. Therefore, this leads us to further analyze the relationship between ICT, ECI, and EcoFP.
The emerging and advancement of ICT progress have different effect on climate change and our ecosystem. It is associated with the formation of environmental-friendly good and services and consumption of cleaner energy. Furthermore, technological advancement is opening up new apparatus with low non-renewable energy consumptions and power supply units which based on renewable energy consumption, therefore mitigate environmental pollution. The association between ICT and EcoFP can be study from different viewpoints; real income (Danish, 2019) human capital (Haini, 2021), and economic development (Huang et al., 2022). In contrast, it can also be known as propellent for environmental unsustainability, economic growth, and industrialization progress. Nevertheless, in the empirical work of few researchers revealed that the relationship between ICT and environmental pollution is significantly positive than that of financial development in the context of highly developed economies (Raheem et al., 2020).
Apart from ICT, measure of economic complexity, ECI is positive related with environmental degradation (i.e., ecological footprint) (Khan et al., 2022a). According to definition of Hidalgo and Hausmann (2009), ECI is country’s economic structure changes, technological-rigorous export, skills and knowledge-based production structure in the direction of particular energy utilization pattern. Undeniably, ECI through skills and education sector plays a very vital role to encourage business activities and improve mitigation process. For example, Dinda (2018) for Unites states, Huang et al. (2022) for E-seven and G-seven economies, Jin et al. (2017) for Chinese economy, Mensah et al. (2018) for OECD group of countries, and Santra (2017) for BRICS countries reported that ECI has negative relationship with environmental unsustainability. The work of Doğan et al. (2019) examined the dynamic relationship between ECI and ecological pollution for lower, middle, and high-income countries. The empirical findings of the study suggested that ECI and environmental unsustainability has positive relationship in lower and middle-income economies, while economic complexity increase environmental sustainability in higher-income countries. Similarly, Chu (2021) examines the relationship between ECI and environmental pollution by using panel data of 118 economies. The findings tested and confirmed EKC-hypothesis in investigated region. Using the panel data with different econometric approaches Dong et al. (2020) evaluated the emission mitigation policy force on China. Likewise, the results revealed that emissions mitigation SDGs-13 decrease diversification in Chinese economy. Moreover, Romero and Gramkow (2021) used 67 countries data to investigate the association between greenhouse gases emissions and ECI by using different panel techniques. The empirical results suggests that ECI depress the level of greenhouse gases and also suggested that advanced and complicated production level has to impend to overthrow environmental pollution. Besides, Pata (2021) and Shahzad et al. (2021) scrutinized the dynamic effect of ECI and demand for energy consumption on EcoFP for USA and revealed that increasing demand for energy consumption positively associated with the EcoFP. Moreover, Neagu and Teodoru (2019) stated that the impact of ECI on ecological degradation is more than that of internal and external trade which ultimately supports to achieve the UN target of SDGs, and the role of ECI and consumptions demand for renewable energy reduces greenhouse gases in the context of developed economies. The empirical findings further revealed that ECI mitigate ecological unsustainability even in the long-run.
In the light of above-mentioned discussion and related literatures listed in Table 1, we observed that ICT and ECI both have the ability that can increase the quality of environment or increase environmental unsustainability depending on their level of diffusion in an economy, time period of analysis, and data and method that are incorporated. Best to our knowledge, only few empirical researches scrutinized the impact of ICT and ECI on EcoFP in the context of developed countries, especially, G-seven economies. To the possible extent, the existing literature have overlooked some important environment influencing factors, such as Research and Development (RD) that might be some foundation of misspecification and biasness. In addition, as for as our knowledge, the current research is the first study of its kind that examines the linkages between ICT, ECI, and, environmental degradation in G-seven economies over the period of 2001–2018. Our study aims to fill the existing research gap in the literature. The empirical findings obtained from the analysis of the study would deliver initial caveats for policymakers of targeted region.
Table 1
Literature review’s summary in tabulated form
Authors | Regions | Time periods | Methodology | Results |
Relationship between ICT and environmental unsustainability |
(Ahmed et al., 2021) | Caribbean and Latin American economies | 1995 to 2017 | Continuously upgraded and fully modified (CUP-FM) and Biased corrected (CUP-BC) models | The results obtained from the models suggest that ICT increase environmental sustainability by reducing carbon emission. |
(Ahmed and Le, 2021) | Six ASEAN economies | 1995 to 2017 | Generalized method of moment (GMM), CUP-FM and CUP-BC models | ICT decrease the intensity of carbon emissions in ASEAN economies |
(Amri et al., 2019) | Tunisian economy | 1975 to 2014 | Autoregressive Distributed Lag (ARDL) | The suggested empirical evidence indicates statistically insignificant relationship between ICT and carbon emission in investigated region. |
(Asongu et al., 2017) | Forty-four Sub-Sharan African economies | 2000 to 2012 | GMM | There is negative relationship between ICT and carbon emissions in targeted region. |
(Avom et al., 2020) | Twenty-one Sub-Saharan African economies | 1996 to 2014 | Panel Corrected Standard Error (PSCE) and Feasible Generalized Leas Square (FGLS) | ICT, energy consumptions, and carbon emissions have positive relationship in Sub-Saharan African countries |
(Chen et al., 2019) | Chinese provinces | 2001 to 2016 | Panel quantile regression model (PQR) | All measures of ICT support to decrease carbon emission in Chinese economy |
(Park et al., 2018) | European Union (EU) | 2001 to 2014 | ARDL-Pooled Mean Group (ARDL-PMG) | The use of internet (proxy for ICT) declines environmental sustainability. The findings also suggest that EU economies did not achieve the goal of green economy. |
(Shabani and Shahnazi, 2019) | Iran | 2002 to 2013 | Dynamic OLS | The findings suggest different results, such as, ICT in services and transportation sector has negative effect on environmental degradation while in the industrial sector ICT and carbon emissions has positive relationship |
(Ulucak and Khan, 2020) | BRICS countries | 1990 to 2015 | CUP-BC and CUP-FM | The development of ICT significantly reduces carbon emissions in investigated region |
(Usman et al., 2021) | Nine Asian countries | 1990 to 2018 | ARDL | The emergence of ICT in economy significantly influence carbon emissions in all countries. |
Relationship between ECI and environmental unsustainability |
(Balsalobre-Lorente et al., 2022) | Portugal, Ireland, Italy, Greece, and Spain (PIIGS) economies | 1990 to 2019 | Dynamic OLS | The empirical findings suggest the nonlinear relationship between ECI and carbon emission. This relationship supports EKC-hypothesis and N-shaped relationships in the long-run. |
(Can and Gozgor, 2017) | France | 1964 to 2014 | Dynamic OLS | The results show that ECI overturns the intensity of carbon emissions in France. The empirical evidence also support the existence of U-shaped association between variables |
(Chu, 2021) | One hundred and eighteen developed and developing economies | 2002 to 2014 | System-GMM | ECI has significantly positive effect on carbon emissions in investigated region |
(Doğan et al., 2019) | Twenty-eight OECD economies | 1990 to 2014 | Augmented Mean Group (AMG), Common correlated AMG (CCEMG), ARDL, Dynamic OLS, and FM-OLS | ECI reduce environmental unsustainability and can help to mitigate environmental effects |
(Khan et al., 2022a) | G-seven economies | 1996 to 2019 | Fully modified ordinary least square (FM-OLS) and Dynamic OLS (DOLS) | The linear impact of ECI decline environmental sustainability, while the non-linear (ECI2) support the presence of EKC-hypothesis |
(Neagu and Teodoru, 2019) | EU | 1995 to 2016 | FM-OLS and DOLS | ECI significantly effect greenhouses green emissions in EU economies for the long-run. |
(Shahzad et al., 2021) | United States of America | 1965 (Quarter-1) to 2017 (Quarter-4) | Quantile autoregression distributed lag (QARDL) model | ECI significantly increase EcoFP in USA. |
Model Specification, Data And Method
We targeted G-seven economies (developed) over the period of 2001 to 2018 (18 years). According to Global Footprint Network (GFN) these countries are in the list of top 10 countries with high EcoFP (GFN, 2018). The data for EcoFP are obtained from official website of GFN (2021) database. As a dependent variable per capita EcoFP used as a proxy for environmental sustainability. Regrading independent variables of our models, we used as many as possible main as well as control variables (see Table 2). We used two types of ICTs (ICTexp and ICTimp), ICPexp measure the percentage of total ICT related exported goods, ICTimp measure the percentage of total ICT related imported goods, ECI presents country’s composition expression of the production process by inclusion the knowledge on their diversity (goods exports), economic growth measure as per capita GDP (US dollars). Likewise, R&D measures the expenditure on research and development programs (% of GDP), FDI, represents the net inflow of foreign direct investment to investigated region. Similarly, access to clean energy and technology is percentage of total population, trade ratio taken in the share of GDP, and population is taken as how many people living per square kilometer of land area.
Table 2
Acronym, Measuring unit, nature, and source of the variables
Variables | Abbreviations | Measures | nature | Source |
Ecological footprint | EcoFP | Per capita ecological footprint (in global hectares) | Main | Global Footprint Network (GFN) https://www.footprintnetwork.org/ |
Informational communication and technology (export) | ICTexp | Export of ICT-related goods | Main | World Development Indicators (WDI) https://databank.worldbank.org/ |
Informational communication and technology (import) | ICTimp | Import of ICT-related goods | Main | WDI https://databank.worldbank.org/ |
Economic Complexity (index) | ECI | The production composition face of a country by installing and inclusion the information of their variety of range (the number of exported product) | Main | ALTAS of Economic Complexity https://atlas.cid.harvard.edu/rankings |
Economic growth | GDPpc | Gross domestic products per person (measure in current price of US dollar) | Main | WDI https://databank.worldbank.org/ |
Foreign Direct Investment | FDI | Net inflow of FDI (percentage of GDP) | Control | WDI https://databank.worldbank.org/ |
Research and Development | RD | Expenditure on research and development (percentage of GDP) | Control | WDI https://databank.worldbank.org/ |
Trade Ratio | TRA | Trade ratio in percentage of GDP | Control | WDI https://databank.worldbank.org/ |
Population | POP | People living per square kilometer of land area (population density) | Control | WDI https://databank.worldbank.org/ |
Econometric Process
The current study analyzes the relationship between ICT, ECI, and EcoFP i.e., whether and how ICT reduce ecological pollution in G-seven countries and what is the possible role of economic complexity in this process. In addition, this study also used some control group factors so that, it would not omit any important factor. Also, all possible variables used in the regressions are converted to logarithmic form to verify homogeneousness in our series. Following the study objective, our EcoFP model as follows.
\(yit=\beta 0+Xit\beta 1it+έit+\) (Equ. 1)
In the above equation, y represents dependent and X represents includes independent variables (including main and control variables). In additions ‘i’ and ‘t’ denotes cross-sections (countries) and time (years), correspondingly, while έ represents stochastic error term.
By considering these variable, our study further proceeds for the specification of the model following Khan et al. (2022), we extant the specification of model with log relationship as follows (see Equ. 2);
lnEcoFPit = B0 + B1lnICTexpit + B2lnICTimpit + B3lnECIit + B4lnGDPit + BnlnXit +\(έit\) (Equ. 2)
Since all variables (dependent and indument variables) in Equ. 2 are presented in log form, the estimated parameters in log form represents long-run responsiveness (long-run elasticities).
Regrading estimation process, firstly, the current study investigates the under-examine panel data of G-seven economies for the cross-sectional dependency, which is a very common matter in panel data. To this end, in this study we have applied Pesaran et al. (2004) CD test and Breusch and Pagan (1980) dependency tests. Additionally, the panel unit root (stationarity tests) have been estimated for level I(0) as well as for 1st difference I(1). Since, the presence of cross-sectional dependency in a series’, we used second-generation stationarity tests. The generalized equational form of first-generation unit root test is presented in Equ. 3 as follow;
ΔY it = ρiYt−1 + ξitλ+еit Equ (3)
Y it = (1-ρi)µi + δiYit-1+εit Equ (4)
In Equ 3 and 4, i is different cross sections (countries), t is time specific time periods (years), ξit and µi represents the deterministic component, while еit express the process of stationary series. Regarding second-generation (CIPS) panel unit root testing approach, this paper also suggests a simple stationary test in the occurrence of cross-sectional dependency. The generalized form of CIPS panel unit root test is presented above in Equ. 5.
Panel Co-integration Approache
The existing of co-integrational association among variables can be explored by using Kao panel co-integration and Engle-Granger based Pedroni test. Based on these tests, the long-run relationship confirms the existence of co-integration, therefore we applied FM-OLS techniques. The Equ. 6 provides the general form of the model:
ǍFM−OLS\(\left({\sum }_{i=1}^{N}{й}_{22i}^{-1}\sum _{t=1}^{T}{\left({x}_{it}-{ x̄}_{i}\right)}^{2}\right)\)−1 \({\sum }_{i=1}^{N}{й}_{11i}^{-1}{й}_{22i}^{-1}\left({\sum }_{t=1}^{N}({x}_{it}-{ x̄}_{i}\right){y}^{*}-T{Ê}_{i}\) Equ (6)
In above equation,
Y * = (yit - ȳ) – \(\left(\frac{{й}_{21i}}{{й}_{22i}}\right)\varDelta\)xit + \(\left(\frac{{й}_{21i}-{й}_{221}}{{й}_{22i}}\right)\)β(xit - x̄i) Equ. (7)
\({Ê}_{i}\) \(\cong\)Ѓ21 + \({{\Omega }}_{21i}^{0}\) – \(\left(\frac{{й}_{21i}}{{й}_{22i}}\right)\) (Ѓ21+\({ {\Omega }}_{21i}^{0}\)) Equ (8)
Thus, yit and xit represents dependent and independent variables, moreover, with partition covariance, й is the triangle of lower-case matrix. Similarly, asymptotic covariance matrix for co-integration analysis is denoted by Ω, while Ѓ presents dynamic covariance in above equations. Furthermore, in the analysis of current study, we also developed the Pooled Mean Group-ARDL (PMG-ARDL) model that allow us for the estimation of both short and long-run coefficients. In the existing literature, many studies suggest several advantages of PMG-ARDL model over FM-OLS model that can be traced by (Afshan and Yaqoob, 2022; Naseer et al., 2022; Zeng and Yue, 2022).