Analysing the heterogeneity of corruption on environmental quality: a two-step fixed-effects panel quantile regression approach
Naceur Benzina, Hayet Kaddachi, Seyi Saint AkadiriPurpose
This study aims to examine the impact of corruption on CO2 emissions in the Gulf Cooperation Council (GCC) countries over the period 2012–2021. The research seeks to determine whether improvements in governance and reductions in corruption influence environmental degradation differently across various levels of CO2 emissions, and to reconcile the divergent predictions of the pollution-haven and “sanding-the-wheels” hypotheses.
Design/methodology/approach
To explore this relationship, the study employs a two-step fixed-effects panel quantile regression (Canay, 2011), which allows the analysis of heterogeneous effects of corruption on CO2 emissions across different points of the emissions distribution. Before estimation, the study applies second-generation panel unit root tests (CIPS, built on cross-sectionally augmented Dickey–Fuller, CADF, regressions), variance inflation factor (VIF) diagnostics, and panel cointegration techniques to ensure the empirical model's robustness and long-run validity. The dataset covers GCC countries from 2012 to 2021.
Findings
The results reveal pronounced heterogeneity in the corruption-emissions relationship. Improved governance, proxied by the Corruption Perceptions Index, is associated with significantly lower emissions among the GCC's lowest-emitting economies. However, this association loses statistical precision among medium- and high-emitting economies. Trade openness emerges as the most robust determinant of emissions, exerting a significant emissions-reducing effect across the entire distribution. At the same time, GDP growth raises emissions significantly only among the highest emitters, indicating that the region has not yet reached an Environmental Kuznets Curve turning point.
Originality/value
This is among the first studies to apply a distributional, quantile-based framework to the corruption-environment nexus in the GCC, a region where empirical evidence remains scarce despite its distinctive combination of high per-capita emissions, hydrocarbon dependence, and state-led governance. By demonstrating that the environmental returns to anti-corruption reform are concentrated among low- and medium-emitting economies, the study offers a more nuanced policy message than the region-wide prescriptions common in the literature: durable emissions reductions among the GCC's largest emitters will require governance reform to be paired with complementary trade and structural policies.