Does geopolitical risk hinder sustainable development goals? Evidence from a panel analysis

Abstract

This paper is likely the first attempt to empirically investigate the direct effect of geopolitical risk on sustainable development goals (SDGs). We employ a newly developed SDG index along with its 17 sub-indices from the United Nations to capture various aspects of sustainable development. On a panel sample covering 41 countries from 2015 to 2021, we find that elevated geopolitical tensions can hinder the progress towards achieving sustainable development goals. This result is robust to various model specifications and estimation approaches. Further analyses show that the two dimensions affected are Decent Work and Economic Growth (SDG8) and Climate Action (SDG13). Heterogeneity test finds that the negative effect of geopolitical risks is only present in countries highly dependent on natural resources. More importantly, improvements in institutional quality could partially offset the detrimental effect of geopolitical risks on sustainable development goals. Therefore, this study provides important implications for policymakers in devising measures to maintain the progress to achieve SDGs in the era of rising global uncertainties.