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Green Kaldorian growth and the structural dynamics of carbon emissions: The role of sustainable industrial performance in the G7

Author

Listed:
  • Caglar, Abdullah Emre
  • Avci, Salih Bortecine
  • Mert, Mehmet

Abstract

This study asks whether sustainable industrial performance (SIP) can make industry-led growth compatible with lower carbon emissions in advanced economies. Drawing on the Green Kaldorian Growth framework, it treats SIP as a structural channel through which cumulative causation, learning, innovation, and infrastructure upgrading may change the environmental consequences of industrial development. The analysis focuses on G7 economies over the period 2000-2024. SIP is measured using the SDG-9 industry index, which captures the sustainability-oriented quality of industrialization through industry, innovation, and infrastructure dimensions. After accounting for cross-sectional dependence, mixed integration orders, and cointegration, the study estimates long-run and short-run relationships using the Cross-sectionally augmented autoregressive distributed lag approach. Additional evidence is obtained from a nonlinear SIP specification, an Environmental Kuznets-type income-emissions assessment, and Dumitrescu-Hurlin panel causality tests. The results show that SIP significantly reduces CO₂ emissions in the long run, while its short-run effect is statistically insignificant. The nonlinear findings indicate an inverted U-shaped SIP-CO₂ relationship, suggesting that sustainable industrial performance becomes emission-reducing after a certain level of industrial maturity is reached. The Environmental Kuznets-type assessment does not support a weakening of the income-emissions relationship over time, which implies that income growth alone is insufficient for carbon mitigation. Human capital and renewable energy use are associated with lower emissions, whereas economic growth and foreign direct investment increase emission pressures. Overall, the findings suggest that carbon mitigation in advanced economies depends less on growth itself than on the direction, composition, and sustainability orientation of structural transformation.

Suggested Citation

  • Caglar, Abdullah Emre & Avci, Salih Bortecine & Mert, Mehmet, 2026. "Green Kaldorian growth and the structural dynamics of carbon emissions: The role of sustainable industrial performance in the G7," Economic Analysis and Policy, Elsevier, vol. 93(C), pages 136-148.
    • Handle: RePEc:eee:ecanpo:v:93:y:2026:i:c:p:136-148
    DOI: 10.1016/j.eap.2026.07.026
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    Keywords

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    JEL classification:

    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth

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