The effects of technology intensity in manufacturing on CO2 emissions: Evidence from developing countries

15 January 2021
Publication Type: Working Paper
JEL Code: F18, I3, I31, I32, I38, O13, O14, O33, Q01, Q54, Q56

Industrialisation is recognised as important for developing countries’ growth and ‘catching up’ with advanced economies, but is also associated with harmful carbon dioxide (CO2) emissions and hence with climate change. This poses a challenge to sustainable development, particularly for late industrialisers: how to industrialise while also mitigating CO2 emissions. This paper investigates the effect of technology intensity in manufacturing on CO2 emissions: is high-technology manufacturing less emitting than medium-technology and, in turn, low-technology manufacturing? We analyse this for a panel of 56 developing economies over the period 1991 to 2014, estimated using generalised method of moments (GMM). Methodologically, we adapt and synthesise the environmental Kuznets curve (EKC) and the stochastic effect by regression on population, affluence and technology (STIRPAT) approaches. We utilise two alternative measures of emissions: absolute and per capita volumes. Our results show that medium- and high-technology manufacturing are associated with higher emissions than low-technology manufacturing. In relation to the technology intensity of manufacturing exports, we find high-technology manufacturing to be associated with lower emissions than medium-technology manufacturing, and in turn low-technology manufacturing. These findings have important policy implications, suggesting that a shift towards more technology-intensive manufacturing may be a more environmentally sustainable industrialisation path for developing countries.

working paper 846
1 January 2021