Abstract:-

This study reconciles the competing evidence in the economic complexity – ecological footprint nexus introducing decentralization as a key moderating factor. Using a global panel spanning four decades, we employ dynamic panel threshold and conditional quantile regression techniques to test for asymmetric effects. Findings reveal that while economic complexity initially exacerbates ecological footprint, its impact becomes favourable beyond a threshold level, reinforced in regions with stronger decentralization. The results remain robust across alternative indicators, sub-samples based on ethnic diversity, geographic location, and data structures. Furthermore, decentralization is more effective in mitigating the negative environmental impact of complexity in less ethnically fragmented regions, while in highly fragmented contexts, complexity itself contributes positively – likely due to public sector responses to resource-based tensions. The study suggests that in diverse societies, concerns over resource-related unrest may incentivize decentralized administrations to act as stewards of the public interest, channelling economic complexity towards sustainable development.

(with Shafkat Shafi Dar)