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Institutions and Environmentally Adjusted Efficiency

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  • Djula Borozan

    (Josip Juraj Strossmayer University of Osijek)

Abstract

Although institutions are recognized as an important factor for achieving economic growth and improving environmental quality, little is known about their effect on environmentally adjusted efficiency, which is critical for both. Employing a two-stage double bootstrap data envelopment analysis, the paper firstly estimates the bias-corrected environmentally adjusted scores for the European Union over the period 2000–2018. They were then regressed to explore the main and interaction effects of different types of institutions on efficiency by using a bootstrapped-truncated regression. The results show that unlike better public governance and stringent enforcement of the rule of law and protection of private rights that brought efficiency gains, more economic freedom and less powerful government unfavorably affected environmentally adjusted efficiency. A significant interaction effect between political and legal institutions slightly reinforced the favorable effect of the former and decreased the importance of the latter on efficiency. The results provide a new empirical insight into the ongoing debate on the role of environmental regulation–driven changes in an economy.

Suggested Citation

  • Djula Borozan, 2023. "Institutions and Environmentally Adjusted Efficiency," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 14(4), pages 4489-4510, December.
    • Handle: RePEc:spr:jknowl:v:14:y:2023:i:4:d:10.1007_s13132-022-01066-y
    DOI: 10.1007/s13132-022-01066-y
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