The Relationship between Economic Complexity and Carbon Dioxide Emissions in Iran Using NARDL Model

The undesirable impacts of climate change affect not only the environment, but all sectors of the society and the economy around the world. Technological advances are one of the factors that can reduce pollutants emissions relative to the amount of economic production. The index of economic complexity is one of the indicators that show the level of knowledge and skills required in the production of goods and is a measure of economic development. In this study, the nonlinear relationship between economic complexity index and carbon dioxide emissions has been investigated using a nonlinear autoregressive distributed lag (NARDL) model during 1971-2018. The results of the model indicate that by an increase in economic complexity, carbon dioxide emissions decrease about 2 percent, and by a decrease in economic complexity, carbon dioxide emissions increase about 12 and 1 percent in the long and short term, respectively. It is noteworthy that due to the low level of economic complexity in Iran, this index has a smaller coefficient than other variables. Also, the results show that the effect of positive and negative shocks of GDP on carbon dioxide emissions in the long term in Iran is symmetric, while the effect of positive and negative shocks of economic complexity on carbon dioxide emissions is asymmetric. It should be noted, the effect of the negative shocks of economic complexity on carbon dioxide emissions is greater than the positive shocks.