Investigating the EKC hypothesis for China: the role of economic complexity on ecological footprint

Abstract

This empirical study aims to test the validity of the environmental Kuznets curve (EKC) hypothesis for China within the framework of (Narayan and Narayan Energy Policy 38(1):661-666, 2010) approach. To this end, the study employs a recently developed Fourier ARDL procedure and time-varying causality test over the period 1965-2016 to analyze the short- and long-term relationships between economic growth, economic complexity index, energy consumption, and ecological footprint. The findings of the Fourier ARDL procedure confirm the existence of cointegration among the series. Moreover, the results of this study demonstrate that energy consumption and ecological complexity increase ecological footprint in both the short- and long term. However, the short-term elasticity of economic growth is smaller than the long-term elasticity, implying that the EKC hypothesis is not valid for China. This finding is robust as it is confirmed by the time-varying causality test. The overall results illustrate that economic complexity has an increasing impact on ecological footprint, and economic growth is not effective to solve environmental problems in China. Therefore, the Chinese government should encourage a more environmentally friendly production process and cleaner technologies in exports to reduce environmental pollution.