- Title
- Empirical essays on institutions, institutional origin and sustainable development: global perspective with particular reference to Sub-Saharan Africa
- Creator
- Acheampong, Alex Opoku
- Relation
- University of Newcastle Research Higher Degree Thesis
- Resource Type
- thesis
- Date
- 2021
- Description
- Research Doctorate - Doctor of Philosophy (PhD)
- Description
- Climate change has been the most challenging environmental issue of our time and has attracted the attention of international organisations, policymakers and researchers. The literature on climate change contains extensive information on the relationship between economic growth and the environment and, in another strand of work, between economic growth and energy consumption. However, research investigating the role of fundamental variables such as institutions and financial development in the economic growth, environment and energy nexus has been limited. Studies using an integrative approach to examine relationships between economic growth, carbon emission and energy consumption are even more scarce but are much needed to bring our understanding and policymaking closer to real-world dynamics and trends towards sustainable development. This study bridges the knowledge gap by providing integrated analysis of the relationships between economic growth, carbon emission and energy consumption with particular focus on institutions and financial development. For the measurement of key variables in this study, economic growth was measured using Gross Domestic Product per capita while energy consumption was measured using energy use (kg of oil equivalent per capita). Financial development was measured using the International Monetary Fund’s composite Financial Development Index. Further, a principal component analysis (PCA) approach was applied on the Kaufmann, Kraay and Mastruzzi (2011) World Governance Indicators (WGI; voice and accountability, the rule of law, regulatory quality, political stability, control of corruption and government effectiveness) to derive a composite institutions index. This study, therefore, contributes to the literature by investigating relationships between institutions, financial development, economic growth, energy consumption and carbon emissions. Although this thesis has sub-Saharan Africa (SSA) as its focus, it pays attention to the state of play at the global level because the world faces environmental and sustainable development challenges as one entity. This thesis reports on three empirical studies. The first empirical study, which to the best of the author’s knowledge is the first to investigate the causal relationships between economic growth, energy consumption and carbon emissions at both global and regional levels using the Love and Zicchino (2006) generalised method of moment panel vector autoregression (GMM-PVAR) estimation technique. The results from this study reveal that at the global level, economic growth does not lead to energy consumption and carbon emissions. Similarly, energy consumption was found to exert a negligible effect on carbon emissions. Further, it was shown that carbon emissions have a positive causal effect on economic growth. These results were found to differ between the SSA, Latin America–Caribbean, Middle East and North Africa and Asia–Pacific regions. This finding contributes to existing knowledge because the subject matter of the thesis is global and no single region’s or country’s activity is sufficient to mitigate climate change. Such global-level research is rare in the literature. The second empirical study builds on the first study by investigating the direct and indirect effect of institutions and financial development on the economic growth–energy consumption nexus in SSA using the Baum, Schaffer and Stillman (2002, 2015) instrumental variable generalised method of moment (IV-GMM) estimation technique. To the best of the author’s knowledge, this is the first empirical study to examines the direct and indirect effect of institutions and financial development on economic growth-energy consumption nexus in SSA. The results of this study reveal that financial development significantly increases economic growth and energy consumption. Interaction between financial development and economic growth (FD*GDP) increase energy consumption. The results further indicate that financial development interacts with energy consumption (FD*EC) to retard economic growth in SSA. In addition, the results show that while institutions have no significant direct effect on energy consumption, they significantly worsen economic growth in SSA. However, when institutions interacted with economic growth (QI*GDP), it reduces energy consumption in SSA. Interacting institutions with energy consumption (QI*EC) boost economic growth in SSA. The interaction between institutions and financial development (QI*FD) has an insignificant effect on energy consumption but the interaction between institutions and financial development (QI*FD) boost economic growth in SSA. The findings further indicate that energy consumption and economic growth are interdependent in SSA. These results differ when the SSA countries are disaggregated into their colonial institutional origins (British, French and others). Institutions and financial development boost economic growth in British ex-colonies compared to other ex-colonies. The third empirical study extends the second study by investigating the effect of institutions on carbon emission mitigation in SSA, using the Blundell and Bond (1998) dynamic system- generalised method of moment. The findings reveal that institutions have a weak effect on reducing carbon emissions. This result is obtained under the assumption that SSA countries are homogeneous. However, when the assumption of homogeneity is relaxed, the results reveal that institutions play a significant role in mitigating carbon emissions in British and French ex-colonies compared to other countries in SSA. To the best of the author’s knowledge, this is the first study to reveals that the impact of institutions and financial development on energy consumption and carbon emissions differ among countries with different institutional origin in SSA. These results have several implications. The findings from the integrated model, which combines economic growth, carbon emissions and energy consumption in a unified framework, suggests that pursuing structural policies to achieve robust economic growth at the global and regional levels, including in SSA will reduce carbon emissions while having a neutral effect on energy consumption. Also, as carbon emissions have a positive relationship with economic growth, global and regional strategies that target reduction in carbon emissions might constrain future economic growth. Further, energy conservation policies will increase economic growth; however, energy and environmental conservation policies should be implemented with care to ensure they do not create closed-form relationships, which could cause a decline in global and regional economic growth at the global and regional levels, including in SSA. Second, given that financial development increases energy consumption and economic growth in SSA, policymakers should embark on policies that will liberalise the SSA financial sector. The current practice is that financial sector liberalisation coupled with strict monitoring of financial institutions and markets could increase competition and drive innovation to promote economic growth and efficient use of energy. Investment in renewable energy remains critical for improving energy efficiency in SSA. Therefore, SSA’s financial institutions should incentivise renewable energy investors by granting them credit at a lower interest rate. Third, reforming and strengthening existing institutions in SSA countries would promote economic growth and energy efficiency while reducing carbon emissions. Thus, building institutions that facilitate property right protection and lower transaction costs will boost economic growth, energy efficiency and environmental quality since property right protection and lower transaction costs drive technological innovation. Finally, policymakers need to consider institutional heterogeneity within SSA when formulating and implementing policies to improve economic growth, carbon emissions and energy efficiency. In conclusion, achieving sustainable development, especially in SSA, requires the implementation of strategies that improve the efficiency of domestic institutions and financial development.
- Subject
- Sub-Saharan Africa; climate change; sustainable development; institutions
- Identifier
- http://hdl.handle.net/1959.13/1429768
- Identifier
- uon:38765
- Rights
- Copyright 2021 Alex Opoku Acheampong
- Language
- eng
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