Exploring the linkage between export diversification and ecological footprint: evidence from advanced time series estimation techniques

Abstract

In recent literature, scholars discussed the role of export diversification in environmental quality. However, most studies analyzed the role of export diversification in influencing carbon dioxide emissions with mixed results. However, since carbon dioxide emissions specifically capture the environmental effects of energy utilization, a change in the level of carbon dioxide emissions cannot be regarded as a comprehensive measure of environmental deterioration. Also, many previous studies use the original form of the Theil index to measure export diversification, and during the interpretation of the results, they disregard the fact that the lower value of the Theil index indicates higher diversification and vice versa. In this context, to address these gaps in the literature, a study on the contribution of export diversification in ecological footprint is necessary to understand the ecological impacts of export diversification. Therefore, this study analyzes the contribution of export diversification in ecological footprint covering the period between 1965 and 2017 using the STIRPAT model in the context of India which is required to fulfill the demands for resources of over 1.3 billion people. The study relied on the environmental Kuznets curve hypothesis framework to understand the role of export diversification in ensuring environmental sustainability. Using the newly developed Augmented ARDL test, the study established that variables of interest are cointegrated. In the long-run estimation, export diversification reduces the ecological footprint of India and helps establish the inverted-U-shaped nexus between ecological footprint and economic growth. Thus, the environmental Kuznets curve hypothesis was evidenced to hold for India. This important finding divulges that India can control the level of environmental footprints, and therefore decrease environmental degradation by continuously increasing export product diversification. Also, India is on the right path to achieve a reduction in ecological footprint associated with more development when accounting for export diversification in the model. Moreover, energy intensity boosts environmental deterioration, while population density reduces it. Finally, the study discusses strategies to achieve environmental sustainability through increasing export diversification.

Keywords: Ecological footprint; Economic growth; Energy intensity; Environmental sustainability; Export diversification; India.