The Impacts of Government Expenditure and Quality of Government on CO2 Emissions in the presence of Environmental Kuznets Curve: A Quantile Regression Approach

Abstract

This study examines the impact of government expenditure and quality of government on environmental pollution within the Environmental Kuznets Curve (EKC) model for 47 Emerging Market and Developing Economies (EMDEs) between 1990 and 2020. Utilizing a quantile regression approach, our research analyzes the independent, interactive, and nonlinear effects of government expenditure and quality of government on environmental pollution. The findings reveal the existence of an environmental EKC in EMDEs. While quality of government has a positive impact on CO2 emissions, government expenditure does not significantly affect CO2 emissions. No interactive effect between government expenditure and quality of government is found in the environmental model. Regarding nonlinear effects, government expenditure exhibits a quadratic relationship with CO2 emissions at quantiles below 70%, whereas quality of government has almost no nonlinear impact on CO2 emissions. Additionally, the results indicate that energy consumption increases CO2 emissions across all quantiles, while globalization enhances pollution in countries with CO2 emissions at the 70th percentile and below. These findings imply significant policy implications related to government expenditure and governance for achieving environmental sustainability in EMDEs.