Political Stability: an Impetus for Spatial Environmental Spillovers

Our paper firstly investigates political stability as an underlying mechanism for the phenomenon of environmental spillovers across countries. If political stability exerts a significant impact on environmental quality and it is contagious across country borders, political stability of neighboring countries would be an impetus for environmental spillovers. Taking into account structural breaks in empirical analysis, we test these hypotheses based on an annual country-level panel data set during 2002 to 2018. Utilizing the dynamic ordinary least square (DOLS) method and the panel-based Vector Error Correction (VEC) model, we demonstrate that an improvement in political stability in one country not only enhances the environmental quality of its own, but also meliorates that of its neighbors through the spillovers of political stability. Our results also withstand sensitivity checks for cross-sectional dependence in the panel. Several policy implications are provided in accordance with our findings.