Do political instability, financial instability and environmental degradation undermine growth? Evidence from belt and road initiative countries

Junaid Ashraf

Journal of Policy Modeling, 2022, vol. 44, issue 6, 1113-1127

Abstract: This study investigates the extent to which political instability (PI), financial instability (FI), and environmental degradation undermine economic complexity (EC). EC is more predictive of future growth and development patterns and correlates with the increased ability to create and export a wide variety of sophisticated (high productivity) items. Using data from up to 56 BRI nations, I routinely obtain precise estimates of the negative effect of PI and FI on EC. Further, we examined the indirect effect of PI and FI through the channel of human capital (HC). These findings confirm the core premise that institutional stability largely influences economic complexity by encouraging creative entrepreneurship, HC accumulation, and allocating human resources to productive activities. Moreover, we examined the indirect effect of PI and FI through the channel of CO2 emissions. These findings support the idea that countries with stable institutions can reduce pollution and protect the environment. It could increase economic complexity while reducing environmental degradation. The main findings support the creation of a pro-development institutional framework that enhance environmental sustainability and reduces poverty by increasing economic complexity.

Keywords: Economic complexity; Institutions; Political instability; Financial instability; CO2 emissions (search for similar items in EconPapers)
JEL-codes: H11 O43 P48 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jpolmo:v:44:y:2022:i:6:p:1113-1127

DOI: 10.1016/j.jpolmod.2022.11.001

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