INSTITUTIONAL QUALITY AND GOVERNMENT EXPENDITURE: AN EMPIRICAL STUDY OF THE ENVIRONMENTAL KUZNETS CURVE (EKC) IN G20 COUNTRIES

Abstract

G20 member countries are forced to reduce carbon dioxide emissions from the global community as well as economic development constraints from domestic resources and the environment. Literature related to institutional quality and government expenditure is still limited, especially in G20 countries. To provide empirical evidence to support the theoretical argument, the study investigated the effects of institutional quality and government expenditure on CO2 emissions using a balanced panel dataset of nineteen countries that were members of the G20 between 1995 and 2015. Empirical results show that institutional quality is able to reduce carbon emissions. A good government can formulate strict environmental regulations and ensure transparency, which allows investment in green technologies and renewable energy. Other findings suggest that government spending can increase carbon emissions. The findings show that government spending in G20 countries still does not consider environmental impacts. Several policy recommendations are suggested.