Role of institutions in correcting environmental pollution: An empirical investigation

A growing literature has highlighted that institutional quality is an effective tool for ensuring a country's sustainability. Institutions play a significant role in the country's development, and specifically in terms of air pollution. How institutional quality enhances or weakens air quality is not been extensively estimated in the literature. This study takes a step forward to investigate the role of institutional quality in CO₂ emissions in Pakistan. An autoregressive distributed lag model (ARDL) is used for data spanning from 1984 to 2016 in the context of Pakistan. The result indicates cointegration among variable under consideration. Overall, empirical results infer that institutions result in increasing CO₂ emissions in Pakistan. Moreover, institutions quality and CO₂ emissions granger cause each other. Further, finding shows that more income reduces CO₂ emissions over time, which validates the EKC existence for CO₂ emissions. Our findings suggest there is a need to strengthen institutions to mitigate the environmental effect.