Institutional Quality, Digitalization, And Environmental Pressure: Evidence On Greenhouse Gas Emissions From Developing Economies

Abstract

This research examines whether the Environmental Kuznets Curve (EKC), represented by an inverted U-shape, applies to developing countries over the period 1995–2022. To account for differences in development levels, the sample is split into upper-middle-income and lower-middle-income groups. An ARDL panel approach is used to explore both short- and long-run relationships. The EKC framework includes per capita income and its squared term to assess the non-linear connection between economic growth and environmental outcomes. Long-run estimates support the inverted U-shaped EKC for the overall sample and for upper-middle-income countries, with per capita income positively related to emissions and the squared term negative and statistically significant. By contrast, for lower-middle-income countries, income growth continues to increase environmental degradation, and the squared term is not significant, indicating that the EKC turning point has not yet been reached. The analysis also considers the effects of ICT penetration and institutional quality. Results show that higher internet use is associated with lower long-term emissions, while stronger institutional frameworks further enhance environmental performance. These findings highlight the critical roles of digitalization and institutional development in promoting sustainable environmental outcomes.