Regional economic growth and disparities in advanced and emerging economies: Evidence from G7 and E7 Countries

Abstract

This study investigates the determinants of economic growth by comparing advanced (G7) and emerging (E7) economies over the period 1995–2023. Employing the Method of Moments Quantile Regression (MM-QR), the research captures distributional heterogeneity that conventional mean-based estimators often overlook. The analysis focuses on a broad set of growth drivers, including institutional quality, capital formation, education, trade openness, taxation, natural resource dependence, unemployment, fertility, and CO 2 emissions. The results reveal a pronounced divergence between the two groups. In G7 economies, robust institutional frameworks and the successful decoupling of growth from emissions underpin sustainable development, while trade openness has negative effects associated with deindustrialization pressures. In contrast, E7 economies continue to rely on resource- and carbon-intensive growth paths, constrained by weaker institutions and structural deficiencies in education that generate significant skill mismatches. Capital formation and natural resource rents emerge as primary drivers of growth in the E7, though with diminishing returns at higher growth levels. The findings also indicate asymmetric causal relationships: institutions reinforce growth in advanced economies, whereas in emerging economies, growth precedes institutional strengthening. Overall, the study contributes to debates on regional disparities by highlighting the structural asymmetries that shape heterogeneous growth trajectories and outlining policy implications for fostering inclusive and sustainable development.