Abstract

The purpose of this paper is to explore the synergies between institutional quality and environmentally sustainable economic growth in developing and emerging economies (EMDEs). Can institutional quality - reflected in effective governance, credible political processes, and administrative capacity - serve as a fundamental determinant of whether economic expansion occurs without compromising the climate? To examine this, the study employs a panel dataset of 37 EMDEs over a fifteen-year period from 2002 to 2016. It uses a multi-method approach to test for the impact of institutional quality on environmental degradation and economic growth, including two-way fixed-effects regressions and logit models. In addition, it tests for the presence of an Environmental Kuznets Curve, and investigates the structural determinants of absolute decoupling between economic growth and environmental degradation. Measuring sustainability, however, proves notionally and empirically challenging, as growth and environmental change do not always move in straightforward or linear ways in EMDEs and there is considerable heterogeneity between their institutional layouts, economic patterns and environmental conditions. The results show that stronger institutions are positively associated with economic growth and, in lagged specifications, contribute to reductions in environmental degradation. In the study’s final specification, the results suggest that governance improvements are associated with a higher probability of decoupling once countries reach roughly $8,300 GDP per capita, while below this threshold, the relationship remains weaker or negative. The overall findings suggest that institutional quality plays a determining role in achieving economic prosperity in an environmentally viable way.

Advisor

Nevatia, Vedanshi

Department

Economics

Disciplines

Education Economics | Management Sciences and Quantitative Methods | Pharmacology, Toxicology and Environmental Health

Keywords

institutional quality, environmentally sustainable economic growth, developing and emerging economies, Environmental Kuznets Curve, decoupling, two-way fixed-effects models

Publication Date

2026

Degree Granted

Bachelor of Arts

Document Type

Senior Independent Study Thesis

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© Copyright 2026 Jonathan Diederich