Corruption can increase environmental efficiency and improve economies in developing countries, study finds

It is possible that corruption leads to better environmental efficiency and an improved economy in developing countries, according to a recent study published in the Cleaner production log.

The study presents a novel Bayesian data envelopment analysis (DEA) approach to examine environmental effectiveness on a national scale. Although consistent with at least some of the environmental efficiency literature, the findings may surprise environmental activists and pro-environment media because the researchers limit the inverse relationship between pollution levels and levels of corruption only in developing countries.

“Corruption could facilitate economic activity and improve environmental efficiency in countries with weak institutions,” says the study’s corresponding author, Dr Panagiotis Zervopoulos, of the University of Sharjah, United Arab Emirates. .

“Consistent with economic growth and some of the environmental efficiency literature, this work identified an inverse relationship between corruption control and environmental efficiency in developing countries.”

The inverse correlation turns out to be “statistically significant” in developing countries, “while it is not in developed countries. Furthermore, the environmental efficiency of developed countries is not affected by formal institutional factors but rather by environmental policies,” notes Dr. Zervopoulos.

The study results are based on Bayesian data envelopment analysis (DEA) using a panel of developed and developing countries spanning from 2002 to 2019.

The sample consists of 144 countries, of which 35 are classified as developed and the remaining 109 as developing, according to the International Monetary Fund’s (IMF) World Economic Outlook database.

Assess environmental efficiency on a national scale by analyzing labor, capital stock, energy consumption, GDP and CO₂ emissions, the authors claim that their investigation is the first to elaborate the effect of institutional factors on environmental efficiency, drawing on the Bayesian DEA approach.

The authors’ inverse link between corruption on the one hand and pollution on the other takes on considerable significance, with world leaders soon heading to the United Arab Emirates, where the authors are based, to attend the global climate summit , COP28, which will be held in Dubai from November 30. until December 12, 2023.

Although the study’s findings expand popular theories of environmental efficiency, Dr. Zervopoulos is quick to note that “this should not be interpreted as justification for the presence of corruption” since developed countries, endowed with Strong institutions are “expected to have greater environmental effectiveness”. than their developing counterparts.

“The effect of lagged environmental efficiencies on current environmental performance is strong and statistically significant, meaning that countries must commit to regulating energy consumption and CO emissions.₂ greenhouse gas emissions, as well as taking measures towards sustainable and resilient growth.

The study examines the relationships between formal institutions, taking into consideration variables such as voice and accountability, political stability, absence of violence, government effectiveness, regulatory quality, state of law and the control of corruption. It recognizes that the classification of a country – in this case developing or developed – plays an important role in the level of environmental efficiency.

Asked what developing countries should do to combat pollution, Dr. Zervopoulos replied: “Developing countries should consider improving factors, such as the Human Development Index (HDI), to become developed nations “. The HDI, an indicator of a country’s health, education and wealth, is one of the criteria for classifying countries as developed or developing, according to the IMF.

Dr. Zervopoulos commends developing countries for making “significant efforts to improve their HDI rankings, reaching, on average, the highest level in 2020, showing a gradual convergence of HDI between developing countries and developed”.

The study, according to its lead author Jawahir Alshehhi, a doctoral student at the University of Sharjah, has “important policy implications at the national level for improving environmental performance, such as the need for greater commitment by countries to further regulate energy consumption and CO2.”₂ emissions and efforts to improve non-environmental factors such as the Human Development Index (HDI).

Additionally, the study’s implications, Alshehhi adds, extend to institutions that “shape a country’s macro environment and guide its economic success and failure.” Institutions use contextual controls to establish and regulate public laws and regulations.”

“Thus, corruption in weaker institutions like those in developing countries benefits environmental efficiency, while strong institutional settings like those in developed countries exert more control over corruption through their stricter laws and regulations .”