The purpose of this paper is to analyse the convergence of environmental policy stringency and its three main components in OECD countries.
New unit root tests have been used to examine the stochastic convergence of the series. Moreover, the conditional convergence of the series has been assessed in the analysis. Sigma convergence analysis has been conducted to check if the dispersion in environmental policy stringency has decreased overtime. The analysis is based on annual data for the period from 1992 to 2020.
Using new unit root tests that allow for gradual and swift breaks, the results reveal evidence for stochastic convergence of environmental policy stringency. Using a new conditional convergence method, the analysis supports the presence of convergence and shows that income level, pollution level and institutional quality facilitate the incidence of convergence of environmental policy stringency. Sigma convergence analysis results also suggest the existence of convergence of environmental policy stringency.
The research on the convergence of environmental policy stringency is virtually absent in the literature. The novelty of this paper is the use of three different approaches to examine the convergence of environmental policy stringency and its components. Various factors responsible for the convergence of environmental policy stringency and its components have also been identified in the study.
