Does the quality of political institutions matter for the effectiveness of environmental taxes? An empirical analysis on CO2 emissions
Working paper n°: 140
Unit: Population Dynamics and Health
Author(s): Donatella Baiardi , Simona Scabrosetti
We empirically investigate the existence of the Environmental Kuznets Curve (EKC) focusing on a sample of 39 countries in the period 1996-2014. Using an interaction model, we also analyze whether the eﬀectiveness of environmental taxes in reducing CO 2 emissions depends on the quality of political institutions. Our results show that the inverted U-shaped relationship between environmental stress and economic development holds independently of the quality of political institutions and environment related taxes. Moreover, an increase in the environmental tax revenue has the expected reducing eﬀect on environmental degradation only in countries with more consolidated democratic institutions, higher civil society participation and less corrupt governments. Our ﬁndings also show that the eﬀects on environmental stress of revenue neutral shifts to diﬀerent tax sources depend not only on the quality of political institutions, but also on the kind of externality the policymaker aims at correcting.
Donatella Baiardi, Dipartimento di Scienze Economiche e Aziendali, University of Parma, Parma, Italy. E-mail: email@example.com
Simona Scabrosetti, Dipartimento di Giurisprudenza, University of Pavia, Pavia, Italy. Carlo F. Dondena Center for Research on Social Dynamics and Public Policies, Università Bocconi, Milano, Italy. E-mail: firstname.lastname@example.org