Document Type : Research Paper

Authors

• Heidar Saeedi ¹
• Mahboobeh Farahati ²

¹ M. A. of Economics, Faculty of Economics, Management and Administrative Sciences, Semnan University, Iran

² Associate Professor of Economics, Semnan University, Semnan, Iran

Abstract

The main objective of this research is to examine the role of institutional quality on the relationship between income inequality and environmental quality, using data from the period 1984-2022 in Iran. For this purpose, per capita carbon dioxide (CO2) emissions and the Gini coefficient are used as indicators of environmental pollution and income inequality, respectively. Furthermore, the institutional quality index is calculated based on the arithmetic mean of indicators such as government stability, socio-economic conditions, investment outlook, corruption, administrative system quality, rule of law, and democratic accountability, drawn from twelve political risk indicators in the International Country Risk Guide (ICRG). The results from applying the Dynamic Ordinary Least Squares (DOLS) technique indicate that in the long term, the impact of income inequality on CO2 emissions is positive and statistically significant, while the interactive effect of institutional quality and income inequality on CO2 emissions is negative and significant. Therefore, Improvements in institutional quality weaken the positive relationship between income inequality and CO2 emissions. Other results indicate that an increase in per capita fossil fuel consumption leads to higher environmental pollution, while the share of renewable energy in total energy consumption has a negative and significant effect on environmental pollution. In line with the results, it is recommended that economic policymakers mitigate the positive effect of income inequality on environmental pollution by strengthening institutional quality and governance transparency.

Keywords

• Environmental quality
• Institutional Quality
• Income inequality
• Iran