Economic globalization and environmental quality: a study of OECD economies

We investigate the relationship between economic globalization and CO2 emissions for the OECD economies from 1970 to 2015. We use three definitions of economic globalization: classic, reconstructed and revisited economic globalization. The relationship between economic globalization and CO2 emissions is established along with real GDP, population and foreign direct investment. We use the stochastic impact of regression on population, affluence, and technology (STRIPAT model) to explain the effects of technology and growth on economic globalization and CO2 emissions interlink. Econometric models such as Newey & West (Newey and West, International Economic Review 28:777–787, 1987) and Driscoll & Kraay (Driscoll and Kraay, Review of Economics and Statistics 80:549–560, 1998), Panel Correlated Standard Error and Feasible Generalized Least Squares are employed to explain our hypotheses. Our empirical estimates suggest that the growth effect and population are essential factors positively influencing environmental quality while technological effects improve environmental quality. We also employ Eberhardt (Eberhardt, The Stata Journal 12:61–71, 2012) Augmented Mean Group, Pesaran (Pesaran, Econometrica 74:967–1012, 2006) Common Correlated Effects Mean Group estimator and Kernel-based regularized least squares to explain the long-run relationship between variables. Our results are consistent with the earlier estimates. Technology improvement and economic globalization are essential factors in driving the environmental quality for the OECD economies. Hence, international and national policies must improve technological efforts and economic globalization.