Do "Big" Liberalizations Hurt the Environment?

Abstract

There is a large literature showing that liberalizations boost economic growth. Do these gains come with environmental costs? In this paper, we use 49 cases of large-scale liberalization-as proxied by large discrete jumps on the Economic Freedom of the World Index-to study the effects of liberalizations on greenhouse gas emissions (total, per capita and per dollar of GDP) and deaths from outdoor air pollution. Using matching methods between liberalizers and non-liberalizers, we find that liberalizations have no consistent effect on total emissions or emissions per capita. However, they do reduce emissions per dollar of GDP and reduce mortality from outdoor air pollution. We then employ synthetic control methods on the largest three liberalizers and the largest de-liberalizer and find the same pattern of results.

Keywords: Economic Growth, greenhouse gases, liberalization, environmental performance