Effect of Institutions Quality on Environment Pollution Based on Kuznets Curve Using Static and Dynamic Panel Data (Case Study: Members of Organization of the Islamic Conference)

This paper investigates the relationship between energy consumption، foreign trade and human development index and environment pollution with emphasis on role of institutions quality according to Environmental Kuznets Curve (EKC). Based on the EKC hypothesis there is an inverted-U-shaped relationship between different pollutants and per capita income. Although، studies about EKC have grown in recent period but in most of these studies the effect of institutions quality on carbon emissions has not been considered. This case has been tested for members of organization of the Islamic Conference (OIC) using the time series data for the period of 1996- 2007. The results from estimation of static and dynamic panel data models show that (i) the EKC hypothesis isn’t empirically supported for members of OIC; (ii) the elasticity of pollution relative to institutions quality is (-0. 24) that indicates when institutions، quality increases by 1%، pollution decreases by 0. 24%; (iii) energy consumption، foreign trade، human development index have significant and positive effect on pollution; (iv) The results of static and dynamic models estimation are consistent together، although quantity of coefficients in dynamic model are smaller than static model. In dynamic model، the elasticity of pollution relative to institutions quality is (-0. 2)، which indicates dynamic effects of institutions quality on pollution is smaller than its static effects.