The role of Innovation on economic growth and climate change

Abstract

This study is investigating and contributing to the hypothesis of the relationship between economic growth and climate change, which the significance of both concepts being accepted by the Environmental Kuznets Curve hypothesis and going a step forward to examine the role of innovation, which as it had been stressed by Stern (2006) it is needed in order to reduce environmental degradation coming from economic activities as well as human activities. Even though there are only few studies that have examined the effects of innovation on climate change as it is stated, and this study is a contribution to that literature as well. The results of this study came from the use of panel data quantitative analysis, including 76 countries from 1990 to 2019 using the method of Least Square Dummy Variable (LSDV) and controlling for cross sectional effects and time variant effects, borrowing the Environmental Kuznets curve methodology, are suggesting that the hypothesis of the literature that innovation reduces the environmental pollution is accepted. Additionally, the hypothesis of EKC has been accepted in the study, as the results show that economic growth has an inverted U-shaped relationship with climate change.