Open Economy, Institutional Quality, and Environmental Performance: A Macroeconomic Approach

Amaryllis Mavragani, Ioannis E. Nikolaou and Konstantinos Tsagarakis
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Amaryllis Mavragani: Business and Environmental Technology Economics Lab, Department of Environmental Engineering, Democritus University of Thrace, Vas. Sofias 12, Xanthi 67100, Greece
Ioannis E. Nikolaou: Business and Environmental Technology Economics Lab, Department of Environmental Engineering, Democritus University of Thrace, Vas. Sofias 12, Xanthi 67100, Greece

Sustainability, 2016, vol. 8, issue 7, 1-13

Abstract: As the subject of how economic development affects the quality of the natural environment has gained great momentum, this paper focuses on examining the extent to which the openness of a market economy and the quality of the institution affect environmental performance. The majority of the current studies focus on the Environmental Kuznets Curve and the level of economic growth. This paper addresses this question by relating environmental (“Environmental Performance Index”) to macroeconomic (Gross Domestic Product per capita, “Open Markets Index”) and governance indicators (“Worldwide Governance Indicators”). The sample consists of 75 countries, including all G20 and EU members, comprising “more than 90% of global trade and investment”. Findings show that the Environmental Performance Index is positively correlated to each of the (institutional) indicators, so as to confirm that the selected indices are consistent with previous studies, suggesting that environmental performance increases in line with economic development and that good governance increases a country’s levels of environmental protection. By applying factor analysis, an empirical model of the Environmental Performance Index is estimated, suggesting that there is a significant positive correlation between a country’s economic growth, the openness of an economy, high levels of effective governance, and its environmental performance.

Keywords: environmental performance index; open economy; open markets index; sustainable development; worldwide governance indicators (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

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