Green Kaldorian growth: A framework for linking manufacturing, innovation, and sustainability

This study examines the impact of medium- and low-technology manufacturing, fossil energy research and development, economic growth, and financial development on environmental sustainability in Germany from 1991 to 2022. By offering a novel perspective on existing literature, this study extends Kaldor's structuralist perspective through empirical investigation of the greening challenge posed by medium- and low-technology manufacturing. Using the load capacity factor as a multidimensional metric of environmental sustainability and applying a novel Fourier Asymmetric ARDL approach, the analysis reveals meaningful nonlinear and asymmetric relationships. The results show that both positive and negative shocks to medium- and low-technology manufacturing significantly reduce environmental sustainability in the short and long run, with positive shocks causing nearly twice the ecological damage compared to the gains from negative shocks. This suggests that medium- and low-technology manufacturing sectors act as a structural constraint on sustainability, pointing to the need for modernizing industrial production. Economic growth and financial development are found to have a significant and positive effect on environmental sustainability, suggesting that Germany has reached a development threshold where growth and environmental goals are mutually reinforcing. In contrast, fossil energy R&D investments exhibit an insignificant effect, highlighting the need to redirect research efforts toward renewable technologies. The findings carry important policy implications for advancing green industrial strategies, scaling sustainable finance, and aligning industrial transformation with Germany's long-term climate commitments and the Sustainable Development Goals.