Entrepreneurship, sectoral outputs and environmental improvement: International evidence

The relationship between entrepreneurship, output and environmental quality receives considerable attention from academics and policymakers, as society searches for solutions leading to environmental sustainability. Given this context, the current study contributes to this discussion by explaining how entrepreneurship and different sectoral outputs can help resolve the environmental problems of global socio-economic systems. So, we used data for 69 countries split across four homogeneous income-based panels: high-income, upper-middle-income, lower-middle-income, and low-income economies. Long-run elasticities suggest that (i) the rate of environmental damage due to the growth of sectoral outputs is much higher in the high-income sample; (ii) compared to output from other sectors, services makes the highest contribution to environmental degradation in high-income countries but its contribution in the other country samples is negative; indicating that a move to services economy would be beneficial for these countries; (iii) with the exception of the high-income sample, there is an inverted U-shaped relationship between output growth and environmental degradation across country samples and sectors; (iv) the contribution of entrepreneurial activity to environmental degradation is lower in high-income countries compared to other country samples; and (v) entrepreneurship activity in high-income countries initially degrades the environment but then improves environmental quality after a certain level, that is, an inverted U-shaped relationship between entrepreneurship and environmental pollution. The findings are sensitive to different income groups and sectoral analyzes. In particular, these empirical findings aid sound economic policymaking for improving environmental quality and sustainable economic development.