Environmental performance, corruption and economic growth: global evidence using a new data set

Abstract

This study investigates the relationship between environmental performance, corruption and economic growth using panel data of 87 countries covering the period from 2002 to 2012. The Environmental Performance Index is used for the first time to evaluate the environmental quality on economic growth. By employing both ‘static’ and ‘dynamic’ panel models, we find that environmental performance is positively related to economic growth and is more significant in non-Organization for Economic Cooperation Development (OECD) countries. Moreover, when corruption is incorporated, the empirical estimation results indicate that although lower corruption helps economic growth in non-OECD countries, the negative coefficients of the three interactive terms show that the positive effect of environment performance on economic growth will drop, while greater environmental performance combined with natural resource abundance inevitably leads to inefficient bureaucracies and hence disadvantageous economic growth. As a result, policymakers in non-OECD countries should carefully ensure better government quality when they exhibit strong environmental performance so as to avoid any disadvantageous impact upon economic growth.

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