AccScience Publishing / AJWEP / Online First / DOI: 10.36922/AJWEP026020006
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ORIGINAL RESEARCH ARTICLE

Green growth and fiscal policy in Asian developing countries: The role of institutional quality

Shomaila Habib1* ,  Alvaro Rocha2 ,  Anum Rashid3 ,  Sadia Batool4
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1 Department of Accounting and Finance, Faculty of Management Sciences, National University of Modern Languages, Islamabad, Pakistan
2 Information Systems and Operations Management, Lisbon School of Economics & Management, University of Lisbon, Portugal
3 Department of Accounting and Finance, Faculty of Management and Social Sciences, Capital University of Science and Technology, Islamabad, Pakistan
4 Department of Educational Development, Faculty of Arts and Humanities, Karakoram International University, Gilgit, Gilgit-Baltistan, Pakistan
AJWEP, 026020006 https://doi.org/10.36922/AJWEP026020006
Received: 6 January 2026 | Revised: 10 February 2026 | Accepted: 13 February 2026 | Published online: 4 May 2026
© 2026 by the Author(s). This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution 4.0 International License ( https://creativecommons.org/licenses/by/4.0/ )
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Abstract

A green economy promotes resource efficiency through lower carbon emissions, social inclusivity, and green economic opportunities. Fiscal spending is a key indicator of a green economy, especially in research and development (R&D) and education. This paper used panel data on 18 Asian developing economies from 2010 to 2023 to examine the impact of fiscal spending through technique and composition channels on the green economy. We also introduced the importance of institutions by constructing the institutional quality index and applying principal component analysis. By using system generalized method of moments, we obtained the following results: (i) there is a positive association between total government spending and green growth; (ii) there exists a positive and significant correlation between education spending and R&D spending on green growth, confirming the presence of composition and technique effect; (iii) the magnitude of the technique effect is substantially greater than that of the composition effect in the sample; and (iv) institutional quality further strengthens the association between fiscal total spending and individual spending on green growth. R&D and education spending foster green economic growth through technological and human-capital-intensive activities, respectively. Although education spending exceeds R&D spending, education spending has a weaker impact on green growth; policymakers should emphasize technical education and allocate more funds to R&D. Moreover, fostering the institutional setting is essential for green growth in Asian developing countries.

Keywords
Green growth
Fiscal policy
Institutional quality
Asia
Funding
None.
Conflict of interest
The authors declare that they have no competing interests.
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Asian Journal of Water, Environment and Pollution, Electronic ISSN: 1875-8568 Print ISSN: 0972-9860, Published by AccScience Publishing
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