UNIVERSITY OF ECONOMICS & BUSINESS FACULTY OF POLITICAL ECONOMY GRADUATION THESIS THE IMPACT OF INSTITUTIONAL QUALITY ON ENVIRONMENTAL POLLUTION IN ASEAN COUNTRIES INSTRUCTOR: DR. DANG TRUNG TUYEN STUDENT: NGUYEN THI THUY NHUNG CLASS: QH-2020-E ECONOMICS 5 PROGRAM: HONORS Hanoi, 10/2023 UNIVERSITY OF ECONOMICS & BUSINESS FACULTY OF POLITICAL ECONOMY GRADUATION THESIS THE IMPACT OF INSTITUTIONAL QUALITY ON ENVIRONMENTAL POLLUTION IN ASEAN COUNTRIES INSTRUCTOR: DR. DANG TRUNG TUYEN CRITICAL LECTURER: DR. NGUYEN THUY ANH STUDENT: NGUYEN THI THUY NHUNG CLASS: QH-2020-E ECONOMICS 5 PROGRAM: HONORS Hanoi, 10/2023 COMMITMENT I hereby declare that the topic thesis “The impact of institutional quality on environmental pollution in ASEAN countries” is the author’s research work carried out under the instructor of Dr.
Dang Trung Tuyen. The information and data used in the project are honest, accurate, and trustworthy. All content is inherited and referenced from sources that have been fully cited and the source stated in the References. I have not published the content and research results of the study in any other author’s research.
I take full responsibility for the above commitment. Instructor Student Dr. Dang Trung Tuyen Nguyen Thi Thuy Nhung ii ACKNOWLEDGMENT First of all, I would like to give my sincere thanks and gratitude to Dr. Dang Trung Tuyen, lecturer at University of Economics & Business - Vietnam National University, Hanoi for his thorough instruction.
His directions, suggestions and comments were paramount important for me to study and accomplish my graduation thesis. I would like to respectfully thank all the lecturers of University of Economics & Business - Vietnam National University, Hanoi, especially the lecturers at the Faculty of Political Economy for teaching and imparting valuable knowledge as well as creating the best conditions for me while I study and research at school. I would like to express my sincere thanks to my family and friends for their interest, encouragement and help during my study and completion of my thesis. Finally, I would like to send all lecturers working at the University of Economics & Business — VNU best wishes for health, happiness in life and success in work.
I hope that the Faculty of Political Economy and the University of Economics & Business will grow stronger and enhance prestige and position in both the fields of education and research at home and abroad. Student Nguyen Thi Thuy Nhung iii COMMITMENT. ACKNOWLEDGMENT TABLE OF CONTENTS. LIST OF ABBREVIA TIONS.
LIST OF TABLES LIST OF FIGURES. CHAPTER 1: THEORETICAL BASIS OF ENVIRONMENTAL POLLUTION AND INSTITUTIONAL QUALITY. Research related to the impact of institutions on environmental quality. Research related to the impact of economic growth on environmental quality 1.
Definition of environmental pollution and institution 1. Definition of environmental pollution 1. Measurement of environmental pollution using CO2 emissions 1. Definition of institution.
Definition of institutional quality. Theoretical analytical framework 1. Pollution Haven Hypothesis 1. Pollution Halo Hypothesis.
The impact of institutional quality on environmental pollution 1. The impact of other factors on environmental pollution. CHAPTER 2: RESEARCH METHODOLOGY. Description of research variables.
Principal component analysis technique 2. Panel unit root test 2. Panel cointegration test. The optimal lag length 2.
Research regression model CHAPTER 3: RESEARCH RESULTS AND DISCUSSION. Results of the tests. Panel unit root test results 3. Cointegration test results.
The optimal lag length 3. ARDL model estimation results. Estimated results for the ASEAN region. Estimated results for countries in ASEAN 34.
Discuss research results for the ASEAN region 3. The impact of control variables on environmental pollution 3. The impact of institutional quality on environmental pollution 3. Discussion of research results for countries in ASEAN 3.
Background and orientation for the ASEAN region. Background of the ASEAN region. Orientation of the ASEAN region in the near future 4. Policy implications for ASEAN region 4.
Policy implications for Vietnam CONCLUSIONS. APPENDIX vi LIST OF ABBREVIATIONS Abbreviation Original ARDL Autoregressive Distributed Lag ASEAN Association of Southeast Asian Nations DFE Dynamic Fixed Effect EU European Union FDI Foreign Direct Investment GDP Gross Domestic Product GMM Generalized Method of Moments ICRG International Country Risk Guide IEA The International Energy Agency IEA International Energy Agency MG Mean Group OECD The Organisation for Economic Co-operation and Development OLS Ordinary Least Squares PMG Pool Mean Group USD United States Dollar VAR Vector autoregressive VECM Vector Error Correction model WGI Worldwide Governance Indicators DCCE Dynamic Common Correlated Effects vii LIST OF TABLES Table 1.1 Previous studies on the impact of institutional quality on environmental pollution Table 1.2 Selected literature on the impact of macroeconomic factors on environmental pollution .1 Description of research variables.2 Correlation matrix results between variables.3 Test the stationarity of the variables .4 Results of cointegration test.5 Optimal lag length of variables in the ARDL model.6 Estimated results according to PMG, DFE and MG techniques.7 Hausman test results.8 Estimation results for country ørOups.9 Estimated results for each ASEAN country viii Figure 1.2 Research model Figure 3.1 Proportion of industry and service sectors Figure 3.2 Proportion of economic sectors in GDP in ASEAN Figure 3.3 Total fuel energy supply by countries in ASEAN Figure 3.4 Institutional quality in ASEAN .5 Institutional quality in each country in ASEAN INTRODUCTION 1. Background Climate change is a phenomenon that has occurred throughout Earth’s history, but in recent decades, it has become more urgent and worrying than ever because of its negative impacts on human health. During the first two decades ofthe 21st century (2001-2020), the earth’s surface temperature increased by 0.99°C and from 2030 onwards it could reach 1.5°C compared to the period 1850-1900, with a probability from 40-60%, according to the Intergovernmental Panel on Climate Change (IPCC, 2023).
The world records record high temperatures, July 2023 is the hottest month recorded on earth (NOAA, 2023) and 2023 is predicted to become one of the 5 hottest years on record (with probability over 99%) (NOAA, 2023). Regions on Earth are affected by these changes (Shaftel et al. The world is recording the level of natural disasters such as forest fires in the Amazon, North America, and Australia or major storms such as Haiyan and Doksuri; Droughts and heat waves are increasing rapidly in many areas not only in frequency and intensity but also in the duration of occurrence (Spinoni et al. According to many studies, the main cause of climate change comes from human activities that cause greenhouse gases, in which CO2 emissions is considered the main factor causing the greenhouse effect (Ritchie et al.
Government awareness of environmental issues is increasing, and governments are interested in addressing environmental issues and their socio-economic impacts (Wang et al. In particular, comprehensive governance and coordinated policies of countries are important keys to pollution control (Congleton, 1992). At the 21st Conference of the Parties to the United Nations Framework Convention on Climate Change (COP21), marking the birth of the Paris Agreement, countries agreed to cooperate internationally in solving environmental problems, as well as the commitment to Nationally Determined Contributions (NDCs) and the responsibilities of all participants. In November 2022, the theme of the COP27 conference in Egypt was “hands-on,” continuing to emphasise international cooperation and commitment to adaptation and solving environmental problems.
Countries make commitments through promulgating environment-related policies, but the results achieved between countries are uneven (Bryntesson, 2023). One of the main reasons for this difference is the institutional quality of countries (Tørstad et al. Research on the impact of agents influencing environmental pollution has attracted much attention (Aye et al., 2017; Ahmed et al., 2017; Hanif et al., 2019; Zaidi et al., 2019; Pata & Caglar, 2021; Usman et al., 2022), however, most research in this field focuses on economic growth, financial development, and energy consumption with little attention to institutional quality. Some studies have been conducted on the impact of institutions on school pollution such as Bernauer & Koubi (2009), Ali et al.
(2019), Yameogo et al. However, research assessing the impact of institutional quality on environmental pollution in the ASEAN region is still very limited. Meanwhile, ASEAN is considered a dynamic economic development region with a real GDP growth rate of 5.8% expected to continue growing in 2024 (OECD, 2023), along with developments in non-agricultural sectors (ASEAN, 2021) have contributed to speeding up the urbanization process. Economies in the early stages of industrialization, with rapid economic development and urbanization, have more CO2 emissions from fossil fuel use than economies that rely heavily on services (ASEAN, 2021).
Thus, studying the impact of institutional quality on environmental pollution in the ASEAN region is very necessary, providing more empirical evidence on this issue. It is the basis for policymakers to propose solutions to reduce CO2 emissions without creating negative impacts on economic development. Research objectives The general objective of the thesis is to research the impact of institutional quality on environmental pollution in ASEAN countries. From the above main objective, the author sets out the following specific objectives: Firstly, 2 ‘ss the impact of macro factors on environmental pollution in the ASEAN.
Secondly, assess the impact of institutional quality on environmental pollution in the ASEAN. Thirdly, assess the impact of institutional quality on environmental pollution in some countries in ASEAN. Research questions What macroeconomic factors impact environmental pollution in ASEAN countries? How does institutional quality impact environmental pollution in the ASEAN? How does institutional quality impact environmental pollution in several ASEAN countries with different institutions? Subject and scope of the research Research subject: The impact of institutional quality and macro factors on environmental pollution in the ASEAN region Research scope: + Time range: from 1996-2020. + Spatial scope: 10 member states of ASEAN include Brunei, Cambodia, Laos, Indonesia, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam.
Research structure To present the entire content of the research, in addition to the Introduction and Conclusions, the thesis s structured in 4 chapters: Chapter 1: Theoretical basis of environmental pollution and institutional quality Chapter 2: Research methodology Chapter 3: Research results and discussion Chapter 4: Some policy implications for ASEAN and Vietnam CHAPTER 1: THEORETICAL BASIS OF ENVIRONMENTAL POLLUTION AND INSTITUTIONAL QUALITY 1. Research related to the impact of institutions on environmental quality The review shows that there have been studies on the impact of institutions on environmental pollution, such as Arminen & Menegaki (2019), Fredriksson & Neumayer (2016), Muhammad & Long (2021), Wawrzyniak & Doryn (2020). However, this relationship is still controversial when experimental results have many disagreements. Recent studies have shown that institutions play an important role in the environment.
Studying the dynamic influence of renewable energy, institutions on economic output and CO2 emissions of 85 economies during the period 1991 to 2012, Bhattacharya et al. (2017) showed that institutions (determined through the economic freedom index) have a negative impact on CO2 emissions, meaning that when institutions are improved, CO2 emissions decrease, contributing to improving the environment. This result is also found in the study of the role of institutions in the relationship between tourism, financial development, energy consumption and environmental performance in European Union countries by Musa et al. Through combining six indicators of institutional quality published by the Worldwide Governance Indicators (WGI) using the principal component analysis (PCA) approach, Musa et al.
(2021) emphasized that quality of institutions that stimulate environmental improvement. Also via PCA approach, Ali et al. Ali et al. (2020) found that institutional performance improves environmental quality in OIC countries using the DCCE estimation method.
However, Arminen & Menegaki (2019) argue that in high-income and upper-middle-income countries, institutional improvements have a relatively ineffective impact on reducing emissions and improving the environment. Besides, in developing countries, the impact of institutional quality on emissions is inconsistent (Mehmood et al. Around the same time, Wawrzyniak & Doryn (2020) argued for this distinction. For countries with high government efficiency, increased GDP will promote reductions in CO2 emissions; and for countries with low government efficiency, an increase in GDP will lead to an increase in CO2 emissions.
Through three indicators to evaluate the institutional quality based on WGI dataset, Yameogo et al.