Convergence in Carbon Dioxide Emissions and the Role of Growth and Institutions - A Parametric and Nonparametric Analysis

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 β-convergence hypothesis in a neoclassical growth model setting with institutional quality as one of the independent variables. The results reveal evidence in support of β-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 β-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