Examining the differences in the impact of climate change on innovation between developed and developing countries: evidence from a panel system GMM analysis

ABSTRACT

This article aims to explore the dynamic relationship between innovation and climate changes for a sample of 60 countries. We performed an aggregated analysis in which we use the whole sample (60 countries) and a disaggregated analysis in which we split the sample in developed (36 countries) and developing (24 countries). We estimate a balance panel dynamic System Generalized Method of Moment approach for the period 2008–2014. Findings of the aggregated analysis indicate that for the whole sample, there is a positive response from climate change to innovation. Recent climate changes have a positive impact on the innovation process. The disaggregate analysis shows that for developed countries, there is a positive response from climate changes to innovation only for total CO2 emission and CO2 emission from natural gas. However, there is a negative response from the other CO2 emission towards innovation. For the developing countries, the overall results indicate that there is no significant effect from climate change to innovation. Furthermore, findings indicate also, that the level of growth and research and development expenditure exert a positive effect on innovation process for both aggregate and disaggregate analysis.

KEYWORDS:

• Climate change
• CO2 emission
• patents
• innovation
• developed and developing countries
• system generalized method of moments

JEL CLASSIFICATION:

• Q56
• Q58
• O34
• O44

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ With an assumption that the global economy will grow by 2.5% annually on average..

² These countries are listed in Appendix A1..

³ For more details, see this patents' statistical profile at this link https://www.wipo.int/ipstats/en/statistics/country_profile/profile.jsp?code=NL..

⁴ The problem of Cross-sectional dependence is raised especially with static panel data analysis (see De Hoyos and Sarafidis (2006) and hence, not of tested for separately at a SGMM method..

⁵ For more detail on the evolution of climate change (CO2 emission) in developed and developing countries, see Appendix A2.