Do ‘Green Growth’ and Technological Innovation matter to Infrastructure Investment? Global Evidence

Abstract

The notion of green growth has emerged as an international policy discourse and response to climate change and ecological breakdown, designed to improve the demand-based and production-based emissions through a nation’s investments in its technological innovations and environmental-related expenditures. Equally, infrastructure investment plays an important role in the provision of fundamental demands and needs such as transport, utilities, communication, and energy, with ‘green infrastructure’ now seen as the new approach for helping tackle climate change. This study investigates the nexus between green growth and infrastructure investment trends through a global investigation of 56 countries for the period 2000-2020. Employing data extracted from Global Infrastructure Outlook, World Bank, and the Organisation for Economic Co-operation and Development (OECD) statistics, based on the Stochastic Impacts by Regression on Population, Affluence and Technology (STIRPAT) and environmental Impact by Population, Affluence and Technology (IPAT) frameworks, several econometric approaches including multiple regression, unit root, cross-sectional dependence, and cointegration tests are employed. The study detects long-run co-integrating relationships amongst infrastructure investment trends, green growth, and environmentally-related spending. Furthermore, the findings indicate that environmentally-related taxes and R&D expenditure on green growth are critical to the investment trends for infrastructure. The findings are consistent but volatile when controlling for different factors in the sample and reveal important policy implications, country-specific insights, and directions for future research investigations.

Keywords: Financing Infrastructure Development; Infrastructure Investment; Carbon Emission; Green Growth; Technological Innovation; Environmental Taxes.

JEL Classification: H2, H5, H54, O1, O11, O18, Q5.