Effect of corruption on green growth

Abstract

Corruption as a social and cultural epidemic is likely to influence the environmental sustainability and quality of the world we live in, where climate change threatens our survival, both now and in the future. Therefore, in this paper, we use large panel data of 123 countries between 2000 and 2017 to examine the environmental effect of corruption on green growth. Consistent with prior studies and due to the slow-changing nature of corruption, we used the pooled ordinary least square as the primary estimator. We also employ the System-Generalised Method of Moments and Two-Stage Least Square Instrumental Variable analysis to control country-specific effects and simultaneity bias caused by potential endogeneity. The results show a negative and significant relationship between corruption and green growth, suggesting that highly corrupt countries are less likely to improve the environmental consequences of rapid economic growth. Quantitatively, ceteris paribus, a 1% increase in corruption (control of corruption), given its standard deviation, leads to a 15.47% decrease in green growth. This is equivalent to about 0.912 US dollars per kilogram decrease in green growth. In further analyses, we find that the relationship between corruption and green growth is similar in both developed and developing countries implying that no country is immune from the environmental effect of corruption. The findings highlight the need to control corruption to achieve sustainable economic and environmentally friendly development, especially as Agenda 2030 fast approaches.