Global Value Chain Participation, Financial Inclusion, and Environmental Degradation: Evidence from Developed and Emerging Countries Using MMQR

The environmental implications of globalization and financial inclusion have become a major concern for both policymakers and researchers. This study examines the heterogeneous relationships between Global Value Chain (GVC) participation, financial inclusion, and CO2 emissions in a panel of 41 developed and emerging economies over the period 2004–2022. To capture differences across emission levels, the analysis employs the Method of Moments Quantile Regression (MMQR), complemented by Fixed Effects (FE), System GMM, and Common Correlated Effects Mean Group (CCEMG) estimators for robustness. The findings reveal substantial heterogeneity across the conditional distribution of CO2 emissions. Forward and backward GVC participation exhibit distinct environmental associations across emission levels, while financial inclusion plays a differentiated moderating role in these relationships. The conditional marginal effects further show that the environmental implications of GVC participation depend on the level of financial inclusion. The robustness analysis confirms the consistency of these findings across alternative estimators. Overall, the results suggest that the environmental consequences of globalization depend on both countries’ emission levels and the role of financial inclusion in shaping the effects of GVC participation. From a policy perspective, the findings highlight the need to align financial development with environmental objectives. Strengthening green finance frameworks and environmental regulations can help ensure that deeper integration into global production networks supports sustainable development rather than increasing environmental degradation.