Human capital, institution and the environmental pollution control

Abstract

Although institutional quality and human capital are widely viewed as important for pollution control, existing cross-country evidence remains mixed. We argue that they are complements: pollution abatement is substantially less effective when either is weak. Using a cross-country sample constructed from data spanning 1990–2014, we estimate an instrumental-variables (2SLS) model in a baseline cross-sectional design and provide panel-based sensitivity checks. To address endogeneity, we instrument quality-adjusted human capital using early-life vaccination coverage and the prevalence of iron-deficiency anemia among children under five. We find that the pollution-reducing effect of quality-adjusted human capital is larger in countries with higher institutional quality. The complementarity is stronger in advanced economies and in countries with stronger rule of law and better control of corruption. Our results suggest that institutional reforms alone may be insufficient for environmental improvement when human capital is low, thus helping explain heterogeneous environmental outcomes across countries.