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Natural resources rent and green investment: Does institutional quality matter?

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  • Alsagr, Naif
  • Ozturk, Ilhan

Abstract

Using fossil fuels has a detrimental effect on the nation's ability to grow sustainably. Consequently, the focus of policymakers and environmentalists worldwide has shifted toward renewable energy and environmental technologies, which demand more green investments in society. In recent times, empirics have started looking into the factors that impact green investment; however, none of the empirics have focused on resource rent and institutional quality as potential determinants of green investment. To fill this vacuum, this study analyzes the influence of resource rent and institutional quality on green investment by employing the random effect and 2SLS methods using 51 top green investing countries from 1996 to 2021. The estimates of the analysis suggest that resource rent hurts green investment. Conversely, political stability, government effectiveness, control of corruption, the rule of law, voice and accountability, and regulatory quality cause green investment to boost. As far as the interaction terms between resource rent and different measures of institutional quality are concerned, most of them hurt the green investment. Among the control variables, GDP, carbon emissions, trade openness, and ICT boost green investment, while the foreign direct investment and consumer price index hurt green investment. Therefore, to promote green investment, policymakers should focus on strengthening and developing institutional quality and reducing reliance on resource rents earned from fossil fuels.

Suggested Citation

  • Alsagr, Naif & Ozturk, Ilhan, 2024. "Natural resources rent and green investment: Does institutional quality matter?," Resources Policy, Elsevier, vol. 90(C).
    • Handle: RePEc:eee:jrpoli:v:90:y:2024:i:c:s030142072400076x
    DOI: 10.1016/j.resourpol.2024.104709
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