Appendix 2 provides the summary statistics. The correlation matrix is presented in Appendix 3. 2.2 Methodology Three empirical strategies are adopted to control for specific characteristics. First, Fixed Effects (FE) regressions are used to control for the unobserved heterogeneity. Then, the bite on endogeneity is increased with control for persistence in the dependent variable by employing the Generalised Method of Moments (GMM) which accounts both for simultaneity using instruments and further controls for the unobserved heterogeneity using time invariant omitted variables. Last, the Tobit model is employed to control for the limited range in the dependent variable. The panel FE model is presented as follows: tiitihhhtititiWCOCOCOIHD,,,41,2,10,, (1) where, tiIHD,is inclusive human development for country iat period t; 0is a constant;COis a CO2emissions variable; COCO, is an interaction term representing the multiplication of two identical CO2emissions variables;Wis the vector of control variables (education quality, private domestic credit, foreign aid and foreign direct investment);iis the country-specific effect and ti,the error term.
8 Since we are employing an estimation technique that deals with interactive regressions, it is relevant to briefly discuss some pitfalls associated with interactive specifications. In accordance with Brambor et al. (2006), all constitutive variables should be involved in the specifications. Moreover, in order for the estimated interactive parameters to make economic sense, they should be interpreted as conditional or marginal effects. A plethora of reasons motivate the choice of an alternative systemGMM estimation strategy, notably, it: (i) does not eliminate cross-country variations; (ii) controls for potential endogeniety in all regressors through instrumentation and accounts for the unobserved heterogeneity and (iii) mitigates potential small sample biases from the differenceestimator (Asongu, 2013; Tchamyou et al., 2018). Moreover, basic conditions for the use of the GMM strategy are also fulfilled, notably: (i) the condition for persistence is apparent because the correlation coefficient between the outcome variable and its first lag is higher than 0.800 which is the rule of thumb for establishing persistence in an outcome variable and (ii) the number of cross sections (or 44 countries) is higher than the number of periods in each cross section (or 13 years). In this study, we adopt the Roodman (2009a, 2009b) extension of Arellano and Bover (1995) which has been established to restrict over-identification and limit the proliferation of instruments (Love & Zicchino, 2006; Baltagi, 2008; Tchamyou, 2018). Hence, the corresponding specification is a two-stepGMM with forward orthogonal deviations instead of differencing. We prefer the two-stepto the one-stepprocedure because the latter is homoscedasticity-consistent while the former controls for heteroscedasticity.
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Econometrics, Greenhouse gas, World energy resources and consumption, Millennium Development Goals