Heterogeneous effects of remittances and institutional quality in reducing environmental deficit in the presence of EKC hypothesis: A global study with the application of panel quantile regression

This study investigates the heterogeneous effects of remittance inflows, institutional quality, foreign direct investment, energy consumption, financial development, and trade openness on the ecological footprint spanning from 1990 to 2016 for the global panel of 93 countries. The current study employs a panel quantile regression (PQR) approach for tickling the distributional and unobserved country-specific heterogeneity. The findings reveal that remittance inflows significantly enhanced the environmental degradation in 5th to 70th quantiles and it turns to becomes negative at 80th to 95th quantiles. Similarly, institutional quality also deteriorates the environmental quality in all quantiles except higher quantiles such as 90th and 95th quantiles, which shows the improved environmental quality. Furthermore, the results support the validity of an inverted U-shaped environmental Kuznets curve (EKC) hypothesis. In addition, financial development, energy consumption, and trade openness significantly deteriorate the environmental quality in the long run. In contrast, foreign direct investment improves environmental sustainability. Moreover, these findings are robust to various robustness analyses which confirm the consistency of the results. Related policy proposals are then offered according to our empirical findings.

Automated summary

The study finds that the effects of remittance inflows and institutional quality on the environment vary across different quantiles, supporting the inverted U-shaped environmental Kuznets curve hypothesis. Financial development, energy consumption, and trade openness significantly deteriorate environmental quality in the long run, while foreign direct investment contributes to environmental sustainability.