Corruption and the Environmental Kuznets curve: an empirical analysis of carbon dioxide, methane and dinitrogen monoxide

The Environmental Kuznets Curve (EKC) hypothesis postulates an inverted-U shape relationship between per capita income and factors of environmental degradation. In this thesis, I investigated how corruption influences the income level at the turning point of EKC for the three most emitted greenhouse gasses, carbon dioxide (CO2), methane (CH4) and dinitrous oxide (N2O). The study is based on a panel of eighty countries which are observed from 2000 and up to and including 2014. The results support the Environmental Kuznets Curve hypothesis for CO2 and CH4 but not for dinitrogen monoxide. I find that the lower the degree of corruption the higher the per capita income at the turning point of CO2 emissions and the lower the per capita income at the turning point of CH4¬ emissions. However, when allowing for different income slopes across richer and poorer countries, the main finds can only be replicated for high-income countries. Contrary to common findings in the literature on climate and corruption, this study suggests that the net effect of corruption is beneficial for the climate, by decreasing the income-level at the turning point of the EKC.