ECONOMIC COMPLEXITY, ECONOMIC GROWTH, AND CO2 EMISSIONS: A GLOBAL PERSPECTIVE

This study investigates the dynamic interplay among economic complexity, carbon dioxide (CO₂) emissions, and economic growth using a Cobb–Douglas production framework and panel data for 116 countries spanning 1990–2017. We estimate a system of simultaneous equations through the Generalized Method of Moments (GMM). The analysis reveals a bidirectional causal link between economic complexity and economic growth, primarily driven by high-income economies. Moreover, a reciprocal relationship exists between economic growth and CO₂ emissions. While greater economic complexity tends to raise CO₂ emissions, increased emissions in turn reduce economic complexity. The evidence also points to a U-shaped association between complexity and growth. Overall, the findings highlight a tension between advancing economic sophistication and achieving environmental sustainability. Policymakers should consider this trade-off when designing innovation and industrial strategies that aim to foster both productivity and ecological balance.

DOI https://doi.org/10.47743/rebs-2026-1-0001