Work

A fuzzy-set QCA approach exploring the role of public and private debt in shaping environmental performance

Year: 2025

Type: article

Abstract: • Financial means and institutional factors combine to impact environmental performance (EP). • Configurations of factors can yield high/non-high EP, irrespective of debt level. • A combination of two or more means is necessary to achieve a high EP. • The role of public and private debt in EP depends on GDP and institutional factors. • High EP requires both financial means (including debt) and institutional factors. Our study analyses the role of both private and public debt, in conjunction with other financial and institutional factors, in shaping environmental performance (EP). Prior research on debt and EP has yielded inconclusive results and neglected the role of private debt and the interplay of various intervening factors. We address these gaps by applying Fuzzy-set Qualitative Comparative Analysis to data from 59 countries. We find multiple pathways to achieving both high and non-high EP, highlighting the lack of a single best approach. Additionally, the results denote that high (non-high) public or private debt does not constrain a high (non-high) EP. The findings also demonstrate that no single financial means, including either type of debt or GDP alone, is necessary by itself for achieving high EP; rather, a combination of at least two financial means is necessary for such an outcome. Relatedly, the absence of all financial means is not sufficient to achieve non-high EP. Moreover, the role of debt on EP tends to depend on the other factors with which it is combined. Finally, financial means must be combined with different mixes of institutional factors for achieving a high and a non-high EP. Hence, our results reconcile previously mixed findings by indicating that the role of private and public debt on EP is contingent on other factors. This underscores the importance of considering the complex interplay between factors influencing environmental outcomes. Accordingly, this research offers insights into theory and informs policy decisions targeting both economic growth and environmental sustainability.

Source: World Development

DOI: 10.1016/j.worlddev.2025.107213

Authors: Maria Pereira, Graça Miranda Silva, Filipe Coelho

Institutions: University of Coimbra, University of Lisbon, ISEG - Instituto Superior de Economia e Gestão

Language: English

Topic: Energy, Environment, Economic Growth

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: hybrid

Estimated APC paid: $5,895

Funder: Fundação para a Ciência e a Tecnologia