Abstract
This paper investigates the impact of institutions on carbon footprints and the income-carbon emission relationship using a comprehensive measure of institutional integrity that encompasses social, economic, and political dimensions. Using the Generalized Methods of Moments and panel data from 120 countries between 1984 and 2016, we find that in models both with and without institutions, there exists an inverted U-shaped relationship between carbon footprints and income. However, the marginal effect of income on carbon emissions is weaker and the income threshold at which additional income reduces carbon footprints is higher in models that account for institutions. We also document heterogeneity in the effect of institutional integrity on carbon emissions across countries by income groups and regions. While some institutional factors do not significantly affect carbon emissions, the combined institutional integrity plays an important role. Policies aiming at mitigating carbon emissions should account for both economic growth and institutional contexts.