Does institutional quality affect air pollution?

ABSTRACT

As environmental pollution brings a series of problems to society and residential lives, how to effectively reduce air pollution and control climate change have become urgent problems. Since institutional quality is an important factor affecting air quality, we evaluated the causal relationship between them based on cross-country panel data from 2000 to 2016. We find that the improvement of institutional quality significantly reduces [Formula see text], and this pollution reduction effect is obvious in high-income countries and in countries with common laws. Furthermore, under the components of institutional quality, the quality of government regulation, the degree of rule of law, corruption control, and government effectiveness have significant emission reduction effects. To explore how institutional quality affects air pollution, we perform mechanism analysis from the perspective of economic development, foreign trade, and technology progress. We further verify three environmental propositions including the Environmental Kuznets Curve, the Pollution Paradise Hypothesis, and Porter Hypothesis. Results show that the pollution reduction effect of institutional quality can be mediated by economic development rate, foreign direct investment, and technological progress. The Environmental Kuznets Curve exists, the Pollution Paradise Hypothesis is validated in countries with lower institutional quality level, and the improvement of the institutional quality can achieve the Porter Effect through technological progress.