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Abstract
This paper contributes to the controversial literature on democratic institutions and environmental quality. Despite an extensive literature, studies have not focused on the transmission channels by which democracy affect environmental quality. Using panel data from 1960 to 2008 in 122 developed and developing countries, results are as follows: First democratic institutions have opposite effects on environmental quality: a positive and direct effect on environmental quality and a negative indirect effect through domestic investments and income inequality. Second, the positive effect of democracy on environmental quality is higher in developed countries than in developing countries.
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