Globalization, Governance, and the Green Economy in Sub-Saharan Africa: Policy Thresholds

Abstract

This study assesses how globalization modulates the effect of governance on carbon dioxide (CO2) emissions in sub-Saharan African countries. The empirical evidence is based on Generalized Method of Moments. The minimum level (or negative threshold) of Foreign Direct Investment required for it to interact with political stability and contribute toward the green economy is 45 percent of gross domestic product (GDP), while 90 percent of GDP is the maximum level (or positive threshold) required for trade to complement “voice and accountability” in mitigating CO2 emissions. Seventy-six percent of GDP and 80 percent of GDP are, respectively, negative trade thresholds for government effectiveness and economic governance. The corresponding negative trade thresholds for the rule of law, corruption-control, and institutional governance are, respectively, 230 percent of GDP, 63.5 percent of GDP, and 106.5 percent of GDP. Actionable openness policy thresholds are provided to inform policy makers on how governance interacts with globalization to promote the green economy.