Carbon dioxide emissions, financial development and political institutions

Dong-Hyeon Kim (), Yi-Chen Wu () and Shu-Chin Lin ()
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Dong-Hyeon Kim: Korea University
Yi-Chen Wu: Soochow University
Shu-Chin Lin: SungKyunKwan University

Economic Change and Restructuring, 2022, vol. 55, issue 2, No 11, 837-874

Abstract: Abstract The paper empirically examines whether and how political institutions shape the nexus between finance and carbon dioxide (CO2) emissions. In a sample of developing and developed countries, it finds that financial development impedes green technology development and thus raises energy use and CO2 emissions, the effects that moderate with improvements in institutional quality. Despite so, there are differences between banks and stock markets, banking competition and concentration, and household and firm credit. Specifically, a more concentrated, less competitive bank-based financial system that lends more to households hinders green technology development and exaggerates energy use and CO2 emissions, and the impacts diminish when institutional quality enhances. Conversely, a more market-oriented financial system with a more competitive and less concentrated banking sector that lends more to private non-financial enterprises promotes green technology development and decreases energy use and CO2 emissions, the effects that weaken when the quality of political institutions betters.

Keywords: CO2 emissions; Financial development; Financial structure; Bank market power; Political institutions (search for similar items in EconPapers)
JEL-codes: E44 Q53 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (9)

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DOI: 10.1007/s10644-021-09331-x

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