Green Taxation and Economic Competitiveness: The Mediating Roles of Innovation Capacity, Energy Efficiency, and Trade Liberalization in a Cross-Country Comparative Analysis

Abstract

This study investigates the relationship between green taxation and economic competitiveness, with a focus on the mediating roles of innovation capacity, energy efficiency, and trade liberalization in a cross-country comparative analysis. Using panel data from 40 developed and developing economies over the period 2010–2023, secondary data were collected from international databases including the World Bank, OECD, IMF, and the World Economic Forum. Green taxation was measured through environmentally related tax revenue as a share of GDP, while economic competitiveness was operationalized using the Global Competitiveness Index. Structural Equation Modeling (SEM) and panel regression techniques were applied to test both direct and indirect effects, with mediation confirmed through bootstrapping procedures. The results show that green taxation has a significant positive impact on economic competitiveness, with its strongest effects realized indirectly through innovation capacity and energy efficiency, and to a lesser extent through trade liberalization. Cross-country differences reveal that developed economies benefit more through innovation-driven pathways, while developing economies gain immediate advantages from energy efficiency improvements. The findings support the view that green taxation, when integrated with complementary innovation, energy, and trade policies, can serve as a strategic instrument for advancing both environmental sustainability and economic growth.

Keywords: Green Taxation, Economic Competitiveness, Innovation Capacity, Energy Efficiency, Trade Liberalization, Cross-Country Analysis