Does institutional quality matter for the nexus between environmental quality and economic growth?: A tropics perspective
Other Publication ResearchOnline@JCUAbstract
The often-conflicting interests of achieving economic development gains and environmental protection have been the source of much research in recent times. At the heart of the issue lies good governance and the development of effective policy mechanisms. To assess the importance of these issues, our study examines the role that institutional quality plays between the nexus of environmental quality and economic growth in the tropical countries. Using a sample of 46 tropical countries from 1971 to 2014, our regression analyses confirm the environmental Kuznets curve (EKC) hypothesis in the tropics. Environmental quality deteriorates as economic activities increase before economic growth reaches a threshold, after which environmental quality improves with economic growth. However, this pattern does not occur unconditionally. With a composite institutional quality index measure constructed using six proxies of institutional quality from the World Bank, we find the EKC hypothesis is evident only in tropical countries with better institutional quality such as political stability, absence of violence/terrorism, and voice and accountability. Further analyses revealed that foreign direct investments (FDIs) have limited impact on the nexus between economic growth and environmental quality in the tropical area.
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Business, Industry, and Trade in the Tropics
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ISBN/ISSN
9780367721213
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Pages Count
20
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Publisher
Routledge
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Publisher Location
Abingdon, UK
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DOI
10.4324/9781003153580-3