Exploring the Effect of Corruption on Carbon Dioxide Emissions in Developed and Developing Countries Using GMM

This paper uses dynamic panel data and generalized method of moments to investigate the direct and indirect effects of corruption on carbon dioxide emissions for the period 2003 to 2012 in developed and developing countries. The results of the estimation indicate that corruption has a negative direct effect on CO2 emission through undermining enforcement of environmental regulations and a positive indirect effect through its negative impact on per capita GDP in developed and developing countries.The total effect, depends on the income level of the countries. Our study confirms the existence of an inverted U-shaped Environmental Kuznets Curve between CO2 emissions and GDP for developed countries and a U-shaped relation for developing countries. In the case of other variables, the lag of the dependent variable, the degree of openness of the economy and the energy consumption in both groups have a positive effect on the relationship between CO2 emissions and GDP, while the share of renewable energy has a negative effect.
JEL Classification: D73، Q53، C33