Introducing Institutional Variables In The Environmental Kuznets Curve (Ekc): A Latin American Study
Several studies have examined the relationship between environmental degradation and per capita income. However, most of them did not take into account institutional quality and just focused on macroeconomic determinants. The purpose of this paper is to fill this gap in the literature by assessing the effects on the Environmental Kuznets Curve (EKC) when institutional quality variables are introduced, especially those related to corruption and rent-seeking behavior. This study considers 18 Latin American economies and panel data for 1998–2005. A standard reducedform modeling approach with pool estimation was employed and, in order to introduce the heterogeneity of the different countries, three different models were estimated. The first model corresponds to the basic Environmental Kuznets Curve (Basic Model), the second model introduced a sets of additional economic variables (Extended Model Nº 1), and finally, the third one introduced institutional variables into the previous formulation (Extended Model Nº 2). The expected results from this investigation lead us to support the EKC hypothesis while confirming the importance of improvements in political institutions and governance for better environmental performances in the region.
Volume (Year): 1 (2012)
Issue (Month): (March)
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