Scandinavian Working Papers in Economics

CERE Working Papers,
CERE - the Center for Environmental and Resource Economics

No 2014:12: Convergence in carbon dioxide emissions and the role of growth and institutions A parametric and nonparametric analysis

Runar Brännlund (), Amin Karimu () and Patrik Söderholm
Additional contact information
Runar Brännlund: CERE, Postal: Department of Economics, Umeå University, S-901 87, Umeå, Sweden
Amin Karimu: CERE, Postal: Department of Economics, Umeå University, S-901 87, Umeå, Sweden
Patrik Söderholm: Department of Business Administration, Technology and Social Sciences Luleå University of technology, Postal: Department of Business Administration, Technology and Social Sciences, Luleå University of technology, Sweden

Abstract: This paper examines convergence of per capita carbon dioxide (CO2) emission for a panel of 124 countries taking into account the impact of the quality of government institutions. The analysis builds on both parametric and nonparametric panel data techniques, and we examine the beta-convergence hypothesis in a neoclassical growth model setting with institutional quality as one of the independent variables. The results reveal evidence in support of beta-convergence of per capita CO2 emissions for the global sample, and for the sub-samples comprising OECD and non-OECD countries, respectively. The results indicate heterogeneity in beta-convergence, which tends to vary with the level of the initial per capita CO2 emissions. We also find evidence of a negative direct effect of institutional quality on growth in per capita CO2 emissions. However, institutional quality also promotes economic growth, thus generating a positive indirect effect on emissions growth. Overall our empirical results suggest a positive total effect of institutions on growth in per capita CO2 emission based on the global sample. Finally, we find some evidence of bias in the parametric approach, in particular in the case of the estimates for the convergence parameter at either end of the distribution.

Keywords: Carbon dioxide; Convergence; Institutions; Nonparametric approach

JEL-codes: O43; Q54; Q56

33 pages, October 10, 2014

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