The Role of Economic Complexity in the Ecological Footprint: A Review of the EKC Hypothesis for Iran

The aim of this study is to test the validity of the Kuznets Environmental Curve (EKC) hypothesis for Iran. For this purpose, this study used the FourierARDL method and causality test with time change to analyze the short-term and long-term relationships between economic growth, economic complexity index, energy consumption, and ecological footprint. Findings from the Fourier ARDL approach confirm the existence of coherence between variables. In addition, the results of this study show that energy consumption and economic growth increase the ecological footprint in the short and long term. However, the short-term elasticity of economic growth is smaller than the long-term elasticity, meaning that the EKC hypothesis is not valid for Iran. This finding is confirmed by the causality test with time change. The overall results show that economic complexity has a diminishing effect on the ecological footprint and economic growth is not effective in solving environmental problems in Iran. Therefore, the Iranian government should encourage an environmentally friendly production process and cleaner technologies in exports to reduce environmental pollution.