Do Technological Advances Promote Ecological Sustainability? Evidence from Panel Causality Analysis for the Dirtiest and Cleanest Countries

Abstract

As a solution to the problem of scarce resources, which stands out in the commonly accepted defnition of the economy, technology assumes the role of humanity’s savior in terms of the efcient use of resources. On the other hand, much research points to the negative efects of technology, such as air pollution and climate change. The motivation of the study is to measure the net efect, considering both the negative and positive efects of technology. Does technology give more to humanity than it takes from humanity? In light of this, the primary question that will be investigated in this study is as follows: What are the efects of technology, which is one of the fundamental components of economic growth, on environmental pollution in countries that have high and low levels of pollution? This approach addresses a gap in the existing literature. To investigate the answer to this question, we use the moment quantile regression (MMQR) method proposed by Machado and Silva (2019) and panel causality tests with cross-sectional dependence and heterogeneity for the most and least carbon emitting countries. The results of the causality tests show that there is a bidirectional causality relationship between total factor productivity (TFP) and Gross Domestic Product (GDP) per capita for the most polluting countries, while there is a unidirectional causality relationship from GDP per capita to TFP for the least polluting countries. Conversely, the same structure applies to the relationship between TFP and CO2 per capita. Consequently, although there are limitations in calculating the monetary value of technology’s negative externalities, it is clear that technology has both losses and gains. It is recommended that a legal infrastructure be established by a supranational authority to prevent negative externalities such as pollution.