Spatial Autocorrelation of CO2 Pollution through the Spatial Spillover of Goods Governance in Middle Eastern and North African Countries

IntroductionSpatial autocorrelation is a known phenomenon in ecological studies that refer to the relationship between certain variables observed in different localities. Whereas correlation statistics were designed to show the relationship between variables, autocorrelation statistics are designed to show the correlations within variables, and spatial autocorrelation shows the correlation within variables across space. Most natural ecological phenomena display spatial autocorrelation found at all spatial scales. Although the spatial autocorrelation concept was developed principally in the late 1950s, it has been applied in environmental economic studies for less than a decade and primarily as a new explanatory variable in the environmental Kuznets curve (EKC) relationship. Spatial ecological autocorrelation is often driven by multiple causes that may be exogenous or endogenous. Maddison (2007) specifies three endogenous mechanisms of spatial environmental autocorrelation: pollution displacement hypothesis, foreign direct investment (FDI) and international trade, and finally, the strategic response of countries to transboundary pollution flows. In the pollution displacement hypothesis, higher-income countries import pollution-intensive goods and in fact export their pollution to lower-income countries. As numerous empirical analyses have identified distance as an important factor in determining the volume of trade, a country’s emissions should be influenced by its neighbors. FDI and international trade are the mechanisms of technology diffusion. Again, distance is a determinant of technology diffusion, and consequently one might expect spatial autocorrelation through FDI and international trade. Finally, spatial autocorrelation may occur as a consequence of countries’ strategic response to transboundary pollution flows. In this case, the spatial relationship between countries is defined not by distance, but by the meteorologically determined pattern of transboundary deposition of pollutions.This paper examines a new mechanism for spatial environmental autocorrelation through institutions. In this mechanism, when the institutions of a country affect its own environmental quality, they affect the institutions of their neighbors simultaneously. This mechanism, which can be called the spatial institutional spillover effect, links the environmental quality of countries together. Materials and MethodsTwo recent findings about the features of institutions influence the subject of this paper. First, institutions and institutional quality can affect the quality of environment. Second, institutional quality can spread spatially. Theoretically, a combination of these two features paves our way to the idea that the environmental quality of geographic units (especially countries) can spread through institutions.