Economic complexity and inclusive green growth: the moderating role of public expenditure on education

Inclusive green growth offers countries seeking new sources of growth an optimistic and realistic alternative that makes economic, environmental and social sense. Existing studies examine the moderating role of various factors in the relationship between economic complexity and certain components of green and inclusive growth, but the role of education is less well known. Therefore, the objective of this study is to examine the moderating role of public expenditure of education in the relationship between economic complexity and inclusive green growth, for the period 2000–2020. On this basis, the study uses several empirical methods to examine the effect of economic complexity on inclusive green growth, as a function of public expenditure of education. The results indicate that economic complexity has a positive effect on inclusive green growth and that positive effect is strengthened when economic complexity interacts with public expenditure of education. The results also show that internet access, industrial employment, female labour force participation, trade openness, institutional quality, household consumption and natural resource rents are important determinants of inclusive green growth. Furthermore, when disaggregating inclusive green growth, the results obtained show that public spending on education essentially play a moderating role in the relationship between economic complexity and inclusive growth. Heterogeneity analysis suggests that the moderating role of public expenditure in the relationship between economic complexity and inclusive green growth is more important in developing countries of Asia and the Middle East, followed by those of Latin America. The results of the study have important policy implications for policy makers in developing countries in promoting inclusive and green growth.