Government Environmental Expenditure and Climate-Driven Risk: The Moderating Roles of Government Effectiveness and Control of Corruption
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Government Environmental Expenditure, Climate-Driven Risk, Government Effectiveness, Control of Corruption
Abstract
Research Originality – Previous studies have largely discussed government environmental expenditure and governance as separate determinants of environmental outcomes. Less attention has been paid to how governance influences the effectiveness of environmental spending in reducing climate-driven risk.
Research Objectives – This study examines whether Government Effectiveness and Control of Corruption moderate the relationship between government environmental expenditure (GEX) and climate-driven risk.
Research Methods – We use an unbalanced panel of 93 countries covering the period from 2013 to 2021. Panel data regressions are estimated using robust standard errors, with interaction terms included to capture the moderating effects of the two governance indicators.
Empirical Results – The results show that higher GEX is significantly associated with lower climate-driven risk. In the baseline estimations, the interaction terms for Government Effectiveness and Control of Corruption indicate that stronger governance tends to reinforce the risk-reducing effect of environmental spending. These results, however, become statistically insignificant when the models are estimated using more conservative clustered standard errors.
Implications – The findings suggest that the effectiveness of environmental spending depends not only on the number of public resources allocated but also on the institutional setting in which those resources are managed. Increasing environmental budgets without improvements in government effectiveness and corruption control may therefore produce limited results.
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References
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