Fiscal policies and governance for green infrastructure development: Evidence from the ASEAN countries

Abstract

This study analyzes the impact of fiscal policy on green infrastructure development in 10 Association of Southeast Asian Nations (ASEAN) countries during the period 2001–2025, using balanced panel data with 250 observations. The econometric model includes fiscal policy, green investment, environmental tax, gross domestic product (GDP) per capita, and population growth. Estimation methods include ordinary least squares (OLS), fixed-effects model (FEM), random-effects models (REM), and correction of model defects using feasible generalized least squares (FGLS) together with REM with robust standard errors. The results show that, after controlling for heteroskedasticity and autocorrelation, only GDP per capita has a statistically significant impact (negative coefficient), implying that higher-income countries in ASEAN tend to have lower levels of green infrastructure, possibly due to early urbanization and industrialization processes. In contrast, fiscal policy, green investment, environmental tax, and population growth do not show statistically significant effects. This finding reflects that green fiscal instruments in ASEAN have not yet demonstrated strong effectiveness, while emphasizing the dominant role of the level of economic development. The study proposes strengthening the integration of green objectives into fiscal policy, improving the efficiency of environmental tax revenue utilization, and enhancing institutional quality to promote more effective green infrastructure development in the region. These findings underscore that fiscal effectiveness in the green transition cannot be separated from governance capacity, as the weak explanatory power of fiscal instruments is consistent with recent evidence that institutional and governance quality shape the environmental payoff of green finance and investment in ASEAN economies (Jahanger et al., 2024; Phan, 2024).