THE RELATION BETWEEN CLIMATE CHANGE AND ECONOMIC GROWTH: THE IN-VESTIGATION THE REGIONAL DIFFERENCES WITH RCM MODEL IN EU-28 COUNTRIES

Abstract

This study investigates the effect of climate change on economic growth. The analysis is conducted for EU-28 countries over the period from 1996 to 2014. We apply tests for endogeneity, cross-sectional dependence, and slope homogeneity, followed by panel unit root and panel cointegration tests. The estimated random coefficient panel regression results show that increasing carbon emissions contribute to economic growth in the relatively colder regions of Northern and Eastern Europe. In contrast, in Southern and Western European countries, the coefficient of CO₂ is insignificant. Increasing carbon emissions positively affect economic growth, particularly through outputs in the agricultural and tourism sectors in Northern and Eastern Europe.

Data:
Received: 10 Mar 2020
Revised: 26 Apr 2020
Accepted: 6 Jun 2020
Published: 20 Jun 2020