Spillover effects of economic globalization on CO2 emissions: A spatial panel approach

This paper investigates the spatial effects of economic globalization on CO2 emissions in a panel of 83 countries over the period 1985-2013. We apply the spatial panel method to address the problems of spatial dependency and the spillover effect among neighboring countries. First, the estimation results verify the existence of the spatial correlations in CO2 emissions across nations. Second, we find that the indirect effect of economic globalization on CO2 emissions is so significantly negative to overcome the positive direct effect, which implies a negative and significant total effect, so our results suggest that being surrounded by highly globalized countries has a positive effect on the environmental quality. Finally, we also find strong evidence for the inverted-U shaped EKC relationship between CO2 emissions and income.