Environmentalism, Globalization and National Economies, 1980-2000

It is commonly assumed that environmentalism harms national economies because environmental regulations constrain economic activity and create incentives for firms to move production and investment to other countries. We point out that global environmentalism involves large-scale institutional changes that: (1) encourage new kinds of economic activity and (2) reconstruct economic value such that environmental protection is rewarded in the market. We employ cross-national panel analyses to examine the effects of national environmentalism on economic growth, trade, industry and investment. We find that pro-environmental countries fare better in terms of economic growth, investment and size of the industrial and service sectors. We find no impact of environmentalism on foreign investment and trade. Firms and investment do not appear to be fleeing countries with strong environmental standards.