Accelerating innovation in industrialized countries: how relevant is the interaction between financial development and environmental factors?

Figures & data

Table 1. Measurement of variables and source.

Variable	Measurement	Source
INNO	Total domestic R&D expenditure (% of GDP)	OECD
FIND	Financial development index (access, depth, and efficiency)	International Monetary Fund- Svirydzenka (2016)
EN_DEG	Ecological footprint per capita	Global Footprint Network
	CO2 emissions (kg)	World Development Indicators
REN_ENER	Share of renewable energy in total energy consumption	World Development Indicators
EN_CONS	Energy use (kilogram of oil equivalent per capita)	World Development Indicators
FDI	Foreign direct investment, net inflows (% of GDP)	World Development Indicators
TRADE	Sum of imports and exports (% of GDP)	World Development Indicators
HUCAP	School enrollment, primary (% gross)	World Development Indicators
RGDPPC	Gross Domestic Product per capita (constant 2010 US dollars)	World Development Indicators

Table 2. Summary statistics.

Variable	Symbol	Mean	Minimum	Maximum
Innovation	INNO	1.568	0.177	4.077
Financial development	FIND	0.602	0.107	1.000
Ecological footprint	EN_DEG	5.330	0.061	10.481
Carbon dioxide emissions	EN_DEG	713,116.6	19,926.48	1.03e + 07
Renewable energy	REN_ENER	12.108	0.325	61.378
Energy consumption	EN_CONS	3,893.401	736.851	8,455.547
Foreign direct investment	FDI	4.565	–15.838	86.589
Trade openness	TRADE	83.132	16.013	437.326
Human capital	HUCAP	102.775	79.857	124.376
Real GDP per capita	RGDPPC	32,176.41	786.129	91,565.73

Table 3. Financial development, environmental degradation, and innovation nexus.

		Ecological footprint		CO2 emissions
	(1)	(2)	(3)	(4)	(5)
Constant	5.1233 (0.000)	0.5449 (0.432)	0.3798 (0.716)	0.0750 (0.954)	1.6878 (0.279)
Lagged INNO	0.6626*** (0.000)	0.4774*** (0.000)	0.5113*** (0.000)	0.3607*** (0.000)	0.3762*** (0.000)
FIND	0.5329*** (0.000)	0.1038** (0.047)	0.5998*** (0.002)	0.4128*** (0.000)	1.7473** (0.042)
TRADE	0.0001 (0.997)	0.0650* (0.076)	0.1017* (0.087)	0.2543*** (0.000)	0.2381*** (0.000)
HUCAP	1.0401*** (0.000)	0.7752*** (0.000)	0.4145** (0.047)	1.1235*** (0.001)	1.3898*** (0.000)
RGDPPC	0.0077*** (0.000)	0.3955*** (0.000)	0.3487*** (0.002)	0.2168*** (0.000)	0.2484*** (0.000)
FDI	0.0129*** (0.003)	0.0164** (0.011)	0.0336*** (0.000)	0.0187** (0.021)	0.0204** (0.026)
EN_DEG	–	–0.3479*** (0.000)	–0.5159*** (0.002)	0.1799*** (0.000)	0.1247*** (0.008)
Interactions
FIND $\times$ EN_DEG		–	0.4812*** (0.003)	–	0.1164* (0.063)
Diagnostics
Second-order serial correlation	0.346	0.188	0.371	0.172	0.105
Sargan test (p-value)	0.000	0.000	0.000	0.000	0.000
Hansen test(p-value)	0.639	0.450	0.364	0.640	0.483
DHT instruments test: GMM instruments (levels): Hansen test excluding group	0.450	0.312	0.169	0.320	0.205
Difference (null H = exogenous)	0.730	0.604	0.723	0.896	0.843
Instruments	10	10	10	10	10
Fisher test (p–value)	0.000	0.000	0.000	0.000	0.000

Notes: * p < 0.10, ** p < 0.05, *** p < 0.01. Values in parentheses are the p-values. INNO = Innovation; FIND = Financial development; HUCAP = Human capital; RGDPPC = Real GDP per capita; FDI = Foreign direct investment; EN_DEG = Environmental degradation; TRADE = Trade openness.

Table 4. Financial development, energy consumption, renewable energy, and innovation.

	Energy consumption		Renewable energy
	(1)	(2)	(3)	(4)
Constant	5.0318 (0.000)	5.3023 (0.002)	6.3475 (0.000)	7.0370 (0.000)
Lagged INNO	0.7037*** (0.000)	0.5515*** (0.000)	0.5562*** (0.000)	0.5598*** (0.000)
FIND	0.4854*** (0.000)	0.5304*** (0.000)	0.5474*** (0.000)	0.5859*** (0.000)
TRADE	0.0236 (0.346)	0.0418 (0.188)	0.0538* (0.055)	0.0280 (0.528)
HUCAP	0.9562*** (0.000)	0.9325*** (0.003)	1.2461*** (0.000)	1.3616*** (0.000)
RGDPPC	0.0120*** (0.000)	0.0581*** (0.000)	0.0152*** (0.000)	0.0079*** (0.000)
FDI	0.0036 (0.168)	0.0040 (0.365)	0.0228*** (0.000)	0.0202** (0.044)
EN_CONS	0.0629*** (0.008)	0.1016*** (0.004)	–	–
REN_ENER	–	–	0.0092*** (0.006)	0.0091** (0.032)
Interactions
FIND $\times$ EN_CONS	–	0.0001* (0.059)	–	–
FIND $\times$ REN_ENER	–	–	–	0.0026 (0.972)
Diagnostics
Second-order serial correlation	0.438	0.268	0.378	0.399
Sargan test (p-value)	0.000	0.000	0.000	0.000
Hansen test (p-value)	0.870	0.929	0.496	0.461
DHT instruments test: GMM instruments (levels): Hansen test excluding group	0.299	0.397	0.326	0.201
Difference (null H = exogenous)	0.956	0.866	0.661	0.818
Instruments	10	10	10	10
Fisher test (p–value)	0.000	0.000	0.000	0.000

Notes: * p < 0.10, ** p < 0.05, *** p < 0.01. Values in parentheses are the p-values. INNO = Innovation; FIND = Financial development; HUCAP = Human capital; RGDPPC = Real GDP per capita; FDI = Foreign direct investment; EN_DEG = Environmental degradation; TRADE = Trade openness; EN_CONS = Energy consumption; REN_ENER = Renewable energy.

Svirydzenka, K. (2016). Introducing a New Broad–Based Index of Financial Development (IMF Working Paper, WP/16/05). https://doi.org/10.5089/9781513583709.001

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Data availability statement

Data available on request from the authors.