Environmental kuznets curve revisited in the presence of threshold effect of institutional quality

This research aims to determine whether institutional quality thresholds exist in the relationship between economic growth and carbon emissions for 99 countries from 2008 to 2015. Using a panel threshold autoregressive estimation, the findings reveal a significant threshold effect of institutional quality in the carbon emissions -economic growth nexus. Carbon emissions rise in response to economic growth when institutional quality is below the threshold; on the other hand, emissions decrease in response to institutional quality above the threshold. The results confirmed the existence of the environmental kuznets curve. Further, the results also validated through robustness testing by splitting the sample into developed and developing countries, indicating that economic growth with better institutional quality can help reduce emissions. Therefore, as a fundamental tactic to address environmental issues alongside economic growth and establish the path for sustainable development, policymakers should concentrate on strengthening institutional quality.