Governance, institutions and the environment-income relationship: a cross-country study

This paper examines the environment-income relationship in the context of the Environmental Kuznets Curve (EKC), and explores the possible role that factors like governance, political institutions, socioeconomic conditions, and education play in influencing this relationship. The results suggest that the EKC exists for carbon dioxide emissions for cross-country data over the period 1984–2002. However, there is nothing automatic about this relationship; policies designed to protect the environment may be responsible for this phenomenon. Two other significant findings are: one, countries with better quality of governance, stronger political institutions, better socioeconomic conditions and greater investment in education have lower emissions; and two, only around 15% of the countries in the dataset have reached income levels high enough to be associated with an unambiguous decline in emissions. The implications of these results are discussed within the context of the international environmental policy arena and the Kyoto Protocol. One of the main objectives of this paper is to bridge the gap between studies conducted on the EKC and developments in the international environmental policy arena. As a final note this paper emphasizes that one needs to connect the body of knowledge on the EKC hypothesis to the international environmental policy arena, despite the apparent difficulty of doing so. One hopes that future studies will further build on this line of thought.

Kuheli DuttEmail: