Assessing the Role of Institutions in Limiting the Environmental Externalities of Economic Growth

Stephane Dees

Working papers from Banque de France

Abstract: Emissions of pollutants tend to be procyclical as they generally increase with economic growth. However, as government policy has a role to play in the mitigation of the environmental consequences of economic activity, the quality of institutions may influence the procyclicality of pollution and reduce the environmental cost of economic growth. Based on the assumption that changes in emissions are stronger at earlier stages of development, we develop a non-linear framework and confirm first the presence of income-related threshold effects in the relationship between pollution (CO2 and greenhouse gas emissions) and growth, for a panel of 142 countries over a period spanning from 1960 to 2017. We also find that institutional quality influences this relationship, lowering both the value of the threshold and the degree of procyclicality of emissions. These results bring therefore evidence that higher institutional quality can attenuate the environmental externalities of economic growth.

Keywords: CO2 Emissions; GHG Emissions; Economic Growth; Institutions. (search for similar items in EconPapers)
JEL-codes: C33 O44 Q56 Q58 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2020
New Economics Papers: this item is included in nep-ene, nep-env and nep-gro
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Related works:
Working Paper: Assessing the Role of Institutions in Limiting the Environmental Externalities of Economic Growth (2022)
Journal Article: Assessing the Role of Institutions in Limiting the Environmental Externalities of Economic Growth (2020)
Working Paper: Assessing the Role of Institutions in Limiting the Environmental Externalities of Economic Growth (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:768

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