Does governance contribute to the public spending – CO<sub>2</sub> emissions nexus in developing economies? Policy lessons for sustainable development

Nguyen, Van Bon

doi:10.3326/pse.48.1.4.

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Does governance contribute to the public spending – CO₂ emissions nexus in developing economies? Policy lessons for sustainable development*

Van Bon Nguyen**

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https://doi.org/10.3326/pse.48.1.4

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Table 1
Dataset description

Variable	Definition	Type	Source
CO₂ emissions (CO2, tons)	CO₂ emissions (metric tons per capita)	log	World Bank
Public spending (EXP, %)	Total expenditure consists of total expense and the net acquisition of nonfinancial assets	%	IMF
Private investment (PIN, %)	Gross fixed capital formation (% GDP)	%	IMF
Economic growth (GDP, USD)	GDP per capita (constant 2010 US$)	log	World Bank
Trade openness (OPE, %)	The sum of exports and imports of goods and services measured as a share of gross domestic product	%	World Bank
Regulatory Quality (GO1)	Regulatory Quality captures perceptions of the ability of the government to formulate and implement sound policies and regulations that permit and promote private sector development.	level	World Bank
Rule of Law (GO2)	Rule of Law captures perceptions of the extent to which agents have confidence in and abide by the rules of society, and in particular the quality of contract enforcement, property rights, the police, and the courts, as well as the likelihood of crime and violence.	level	World Bank
Voice and Accountability (GO3)	Voice and Accountability captures perceptions of the extent to which a country's citizens are able to participate in selecting their government, as well as freedom of expression, freedom of association, and a free media.	level	World Bank
Control of Corruption (GO4)	Control of Corruption captures perceptions of the extent to which public power is exercised for private gain, including both petty and grand forms of corruption, as well as "capture" of the state by elites and private interests.	level	World Bank
Government Effectiveness (GO5)	Government Effectiveness captures perceptions of the quality of public services, the quality of the civil service and the degree of its independence from political pressures, the quality of policy formulation and implementation, and the credibility of the government's commitment to such policies.	level	World Bank
Political Stability (GO6)	Political Stability and Absence of Violence/Terrorism measures perceptions of the likelihood of political instability and/or politically-motivated violence, including terrorism.	level	World Bank

Source: Author’s preparation.

Table 5
Public spending, governance, and CO₂ emissions: 2SGMM estimates, 2002-2021 (baseline regression)

Variables	GO1	GO2	GO3	GO4	GO5	GO6
CO₂ emissions (-1)	0.981^***(0.002)	0.977^***(0.002)	0.980^***(0.002)	0.979^***(0.002)	0.980^***(0.002)	0.982^***(0.002)
Public spending	-0.070^***(0.011)	-0.054^***(0.012)	-0.083^***(0.014)	-0.054^***(0.012)	-0.065^***(0.012)	-0.095^*** (0.016)
Governance	2.228^***(0.420)	2.509^***(0.469)	1.709^***(0.393)	2.181^***(0.405)	1.835^***(0.416)	1.388^*** (0.362)
Private investment	0.384^***(0.044)	0.369^***(0.046)	0.360^***(0.050)	0.393^***(0.048)	0.330^***(0.045)	0.396^*** (0.053)
Economic growth	0.0003 (0.001)	0.0000 (0.001)	0.0023(0.001)	-0.0004 (0.001)	0.001 (0.001)	0.001 (0.001)
Trade openness	-0.042^***(0.012)	-0.039^***(0.012)	-0.054^***(0.015)	-0.046^***(0.012)	-0.045^***(0.013)	-0.049^*** (0.015)
Instrument	41	41	37	38	40	36
Country/Observation	109/1635	109/1635	109/1635	109/1635	109/1635	109/1635
AR(2) test	0.964	0.980	0.960	0.966	0.969	0.963
Sargan test	0.190	0.355	0.159	0.183	0.229	0.205
Hansen test	0.156	0.126	0.106	0.108	0.111	0.125

Note: *** denotes a 1% significance level, ** 5% significance level, and * 10% significance level.

Source: Author’s calculation.

Table 6
Public spending, governance, and CO₂ emissions: 2SGMM estimates, 2002-2021 (full model)

Variables	GO1	GO2	GO3	GO4	GO5	GO6
CO₂ emissions (-1)	0.977^*** (0.002)	0.973^*** (0.002)	0.977^*** (0.002)	0.979^*** (0.002)	0.977^*** (0.002)	0.981^*** (0.002)
Public spending	-0.138^*** (0.027)	-0.175^*** (0.035)	-0.107^*** (0.022)	-0.186^*** (0.031)	-0.132^*** (0.028)	-0.112^*** (0.021)
Governance	5.251^*** (0.902)	6.499^*** (1.033)	3.545^*** (0.598)	5.234^*** (0.861)	4.759^*** (0.793)	3.041^*** (0.658)
Pub. spend*Governance	-0.097^*** (0.023)	-0.130^***(0.026)	-0.052^*** (0.012)	-0.103^*** (0.020)	-0.082^*** (0.020)	-0.053^*** (0.017)
Private investment	0.339^*** (0.048)	0.357^*** (0.049)	0.349^*** (0.048)	0.393^*** (0.044)	0.347^*** (0.048)	0.396^*** (0.052)
Economic growth	0.003^** (0.001)	0.004^*** (0.001)	0.003^** (0.001)	0.003^** (0.001)	0.003^** (0.001)	0.001 (0.001)
Trade openness	-0.025^*** (0.010)	-0.027^*** (0.011)	-0.050^*** (0.014)	-0.031^*** (0.011)	-0.033^*** (0.011)	-0.043^*** (0.013)
Instrument	36	37	38	39	37	37
Country/Observation	109/1635	109/1635	109/1635	109/1635	109/1635	109/1635
AR(2) test	0.949	0.968	0.977	0.957	0.966	0.946
Sargan test	0.167	0.353	0.204	0.211	0.205	0.231
Hansen test	0.160	0.205	0.229	0.340	0.114	0.229

Note: *** denotes a 1% significance level, ** 5% significance level, and * 10% significance level.

Source: Author’s calculation.

Table 7
Public spending, governance, and CO₂ emissions: 1SGMM estimates, 2002-2021 (baseline regression)

Variables	GO1	GO2	GO3	GO4	GO5	GO6
CO₂ emissions (-1)	0.981^*** (0.002)	0.977^*** (0.002)	0.980^*** (0.002)	0.979^*** (0.002)	0.979^*** (0.002)	0.983^*** (0.002)
Public spending	-0.045^* (0.024)	-0.032 (0.022)	-0.054^** (0.024)	-0.038^* (0.022)	-0.050^** (0.021)	-0.071^*** (0.025)
Governance	1.803^*** (0.550)	2.533^*** (0.556)	1.817^*** (0.438)	2.327^*** (0.526)	1.986^*** (0.517)	1.277^*** (0.457)
Private investment	0.309^*** (0.076)	0.310^*** (0.075)	0.284^*** (0.097)	0.332^*** (0.097)	0.280^*** (0.076)	0.311^*** (0.100)
Economic growth	0.0006 (0.002)	0.0009 (0.002)	0.004^** (0.002)	0.001 (0.001)	0.003 (0.002)	0.003 (0.002)
Trade openness	-0.038^** (0.018)	-0.043^*** (0.017)	-0.067^*** (0.020)	-0.051^*** (0.018)	-0.051^*** (0.016)	-0.057^*** (0.018)
Instrument	41	41	37	38	40	36
Country/Observation	109/1635	109/1635	109/1635	109/1635	109/1635	109/1635
AR(2) test	0.952	0.983	0.961	0.957	0.964	0.961
Sargan test	0.190	0.355	0.159	0.183	0.229	0.205

Note: *** denotes a 1% significance level, ** 5% significance level, and * 10% significance level.

Source: Author’s calculation.

Table 8
Public spending, governance, and CO₂ emissions: 1SGMM estimates, 2002-2021 (full model)

Variables	GO1	GO2	GO3	GO4	GO5	GO6
CO₂ emissions (-1)	0.979^*** (0.002)	0.975^*** (0.002)	0.978^*** (0.002)	0.978^*** (0.002)	0.978^*** (0.002)	0.981^*** (0.002)
Public spending	-0.084^* (0.047)	-0.142^*** (0.049)	-0.085^*** (0.028)	-0.153^*** (0.049)	-0.093^** (0.040)	-0.084^*** (0.027)
Governance	3.803^*** (1.609)	6.104^*** (1.514)	3.533^*** (0.811)	5.330^*** (1.277)	4.049^*** (1.368)	2.770^*** (0.842)
Pub. spend*Governance	-0.073^* (0.039)	-0.124^*** (0.040)	-0.051^*** (0.016)	-0.100^*** (0.032)	-0.073^*** (0.030)	-0.049^*** (0.019)
Private investment	0.244^*** (0.101)	0.282^*** (0.091)	0.287^*** (0.097)	0.342^*** (0.097)	0.269^*** (0.081)	0.315^*** (0.100)
Economic growth	0.002 (0.002)	0.004^* (0.002)	0.005^*** (0.002)	0.004^** (0.002)	0.002 (0.002)	0.003 (0.002)
Trade openness	-0.021 (0.019)	-0.032^** (0.016)	-0.064^*** (0.0120)	-0.046^*** (0.016)	-0.029 (0.018)	-0.054^*** (0.017)
Instrument	36	37	38	39	37	37
Country/Observation	109/1635	109/1635	109/1635	109/1635	109/1635	109/1635
AR(2) test	0.938	0.968	0.987	0.958	0.960	0.937
Sargan test	0.167	0.353	0.204	0.211	0.205	0.231

Note: *** denotes a 1% significance level, ** 5% significance level, and * 10% significance level.

Source: Author’s calculation.

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Does governance contribute to the public spending – CO₂ emissions nexus in developing economies? Policy lessons for sustainable development*