Does Institutional Quality Improve Environmental Quality? New Evidence from NARDL Approach


  • Muhammad Yasin Abid Ph.D. Scholar, Department of Economics and Statistics (HSM), University of Management Technology, Lahore, Pakistan
  • Muhammad Tasnim Khan Ph.D. Scholar, Management Sciences, Dr. Hasan Murad School of Management, University of Management Technology, Lahore, Pakistan
  • Hafeez ur Rehman Professor, Department of Economics and Statistics (HSM), University of Management Technology, Lahore, Pakistan



Institutional Quality, Carbon Emissions, Energy Use, NARDL, Pakistan


The current research intends to look at the asymmetrical influence of institutional quality (IQ) on carbon emissions (????????2e) by incorporating additional variables i.e., trade openness (TO), population growth (PG), and energy use (E) over the period 1980-2020. The current study used nonlinear ARDL to demonstrate the nonlinear influence of IQ on ????????2e. The empirical finding suggests that positive fluctuation in institutional quality considerably improves the environmental quality in Pakistan in the short and long run. At the same time, the outcomes show that negative fluctuations in IQ lead to considerably contributed to ????????2e in long run. GDP and E are positively connected with ????????2e. The policy makers could need to enhance the institutional quality leads to attaining the long-term ecological objectives.


Abid, M. (2016). Impact of economic, financial, and institutional factors on CO2 emissions: evidence from sub-Saharan Africa economies. Utilities Policy, 41, 85-94.

Abid, M. (2017). Does economic, financial, and institutional developments matter for environmental quality? A comparative analysis of EU and MEA countries. Journal of environmental management, 188, 183-194.

Adams, S., &Klobodu, E. K. M. (2017). Urbanization, democracy, bureaucratic quality, and environmental degradation. Journal of Policy Modeling, 39(6), 1035-1051.

Ahmad, M., Ul Haq, Z., Khan, Z., Khattak, S. I., Ur Rahman, Z., & Khan, S. (2019). Does the inflow of remittances cause environmental degradation? Empirical evidence from China. Economic research-Ekonomskaistraživanja, 32(1), 2099-2121.

Ahmad, N., Du, L., Lu, J., Wang, J., Li, H. Z., & Hashmi, M. Z. (2017). Modeling the CO2 emissions and economic growth in Croatia: is there any environmental Kuznets curve?. Energy, 123, 164-172.

Aron, J. (2000). Growth and institutions: a review of the evidence. The world bank research observer, 15(1), 99-135.

Bellakhal, R., Kheder, S. B., &Haffoudhi, H. (2019). Governance and renewable energy investment in MENA countries: How does trade matter?. Energy Economics, 84, 104541.

Bertocchi, G., & Canova, F. (2002). Did colonization matter for growth? An empirical exploration into the historical causes of Africa's underdevelopment. European economic review, 46(10), 1851-1871.

Bhattacharya, M., Churchill, S. A., &Paramati, S. R. (2017). The dynamic impact of renewable energy and institutions on economic output and CO2 emissions acrossregions. Renewable Energy, 111, 157-167.

Cadoret, I., & Padovano, F. (2016). The political drivers of renewable energies policies. Energy Economics, 56, 261-269.

Ellis, J. (2010). The Effects of Fossil-Fuel Subsidy Reform: A review of modeling and empirical studies. Available at SSRN 1572397.

Fredriksson, P. G., Vollebergh, H. R., &Dijkgraaf, E. (2004). Corruption and energy efficiency in OECD countries: theory and evidence. Journal of Environmental Economics and Management, 47(2), 207-231.

Grier, R. M. (1999). Colonial legacies and economic growth. Public Choice, 98(3), 317-335.

Grossman, G. M., & Krueger, A. B. (1991). Environmental impacts of a North American free-trade agreement.

Grossman, G. M., & Krueger, A. B. (1995). Economic growth and the environment. The quarterly journal of economics, 110(2), 353-377.

Hsu, A., Rosengarten, C., Weinfurter, A., Xie, Y., Musolino, E., & Murdock, H. E. (2017).

Renewable energy and energy efficiency in developing countries: contributions to reducing global emissions-third report.

Khan, M. T., Anwar, M. M., & Husnain, M. (2021). The relationship between corporate diversification and tax avoidance: empirical evidence from the emerging economy of Pakistan. Journal of Accounting and Finance in Emerging Economies, 7(1), 35-52.

La Porta, R., Lopez-de-Silanes, F., & Shleifer, A. (2008). The economic consequences of legal origins. Journal of economic literature, 46(2), 285-332.

Lau, L. S., Choong, C. K., &Eng, Y. K. (2014). Carbon dioxide emission, institutional quality, and economic growth: empirical evidence in Malaysia. Renewable energy, 68, 276- 281.

Ménard, C., & Shirley, M. M. (Eds.). (2005). Handbook of new institutional economics (Vol. 9).Dordrecht: Springer.

Mensi, Walid, Syed Jawad Hussain Shahzad, ShawkatHammoudeh, and Khamis Hamed Al- Yahyaee. "Asymmetric impacts of public and private investments on the non-oil GDP of Saudi Arabia." International Economics 156 (2018): 15-30.

Munir, K., & Riaz, N. (2020). Asymmetric impact of energy consumption on environmental degradation: evidence from Australia, China, and the USA. Environmental Science and Pollution Research, 1-11.

Nilrit, S., Sampanpanish, P., &Bualert, S. (2017). Comparison of CO2 emissions from vehicles in Thailand. Applied Environmental Research, 39(1), 65-74.

North, D. C. (1989). Institutions and economic growth: An historical introduction. World Development, 17(9), 1319-1332.

North, D. C. (2018). Institutional change: a framework of analysis. In Social Rules (pp. 189- 201). Routledge.

North, D. C., & North, D. C. (1992). Transaction costs, institutions, and economic performance (pp. 13-15). San Francisco, CA: Ics Press.

Omri, A. (2014). An international literature survey on energy-economic growth nexus: Evidence from country-specific studies. Renewable and Sustainable Energy Reviews, 38, 951- 959.

Panayotou, T. (1993). Empirical tests and policy analysis of environmental degradation at different stages of economic development (No. 992927783402676). International Labour Organization. Vogel, D. (1997). Trading up and governing across: transnational governance and environmental protection. Journal of European public policy, 4(4), 556-571.

Panayotou, T. (1997). Demystifying the environmental Kuznets curve: turning a black box into a policy tool. Environment and development economics, 2(4), 465-484.

Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of applied econometrics, 16(3), 289-326

Saidi, K., &Hammami, S. (2015). The impact of energy consumption and CO2 emissions on economic growth: Fresh evidence from dynamic simultaneous-equations models. Sustainable Cities and Society, 14, 178-186.

Shah, S. Z., Chughtai, S., & Simonetti, B. (2020). Renewable energy, institutional stability, environment and economic growth nexus of D-8 countries. Energy Strategy Reviews, 29, 100484.

Shah, S. Z., Chughtai, S., & Simonetti, B. (2020). Renewable energy, institutional stability, environment and economic growth nexus of D-8 countries. Energy Strategy Reviews, 29, 100484.

Shin, Y., Yu, B., & Greenwood-Nimmo, M. (2014). Modelling asymmetric cointegration and dynamic multipliers in a nonlinear ARDL framework. In Festschrift in honor of Peter Schmidt (pp. 281-314). Springer, New York, NY.

Solarin, S. A., Al-Mulali, U., & Ozturk, I. (2017). Validating the environmental Kuznets curve hypothesis in India and China: The role of hydroelectricity consumption. Renewable and Sustainable Energy Reviews, 80, 1578-1587.

Stern, D. I. (2012). Modeling international trends in energy efficiency. Energy Economics, 34(6), 2200-2208.

Tamazian, A., & Rao, B. B. (2010). Do economic, financial and institutional developments matter for environmental degradation? Evidence from transitional economies. Energy economics, 32(1), 137-145.

Uzar, U. (2020). Political economy of renewable energy: does institutional quality make a difference in renewable energy consumption? Renewable Energy, 155, 591-603.

Williamson, O. E. (1989). Transaction cost economics. Handbook of industrial organization, 1, 135-182.

Wong, S., Bhattacharya, K., & Fuller, J. D. (2010). Long-term effects of feed-in tariffs and carbon taxes on distribution systems. IEEE Transactions on Power Systems, 25(3), 1241-1253.

World Bank, (2022). World development indicators. Retrieved from

World Governance, (2022). World Governance indicators. Retrieved from

Yao, X., Yasmeen, R., Padda, I. U. H., Shah, W. U. H., & Kamal, M. A. (2020). Inequalities by energy sources: an assessment of environmental quality. PloS one, 15(3), e0230503.




How to Cite

Abid, M. Y. ., Khan, M. T. ., & Rehman, H. ur . (2022). Does Institutional Quality Improve Environmental Quality? New Evidence from NARDL Approach. Review of Economics and Development Studies, 8(2), 97-109.