Democratic Institutions and Environmental Quality: Effects and Transmission Channels
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This paper aims at analysing the effect of democratic institutions on environmental
quality (carbon dioxide per capita, sulfure dioxide per capita) and at identifying potential
channel transmissions. We use panel data from 1960 to 2008 in 122 developing and
developed countries and modern econometric methods. The results are as follows: Firstly, we
show that democratic institutions have opposite effects on environment quality: a positive
direct effect on environment quality and a negative indirect effect through investments and
income inequality. Indeed, democratic institutions attract investments that hurt environment
quality. Moreover, as democratic institutions reduce income inequality, they also damage
environment. Secondly, we find that the direct negative effect of democratic institutions is
higher for local pollutant (SO2) than for global pollutant (CO2). Thirdly, the nature of
democratic institutions (presidential, parliamentary) is not conducive to environmental
quality. Fourtly, results suggest that the direct positive effect of democratic institutions on
environment quality is higher in developed countries than in developing countries. Thus, the
democratic process in the first group of countries has increased their awareness for the
environment protection.