Scandinavian Working Papers in Economics

Working Papers in Economics,
University of Gothenburg, Department of Economics

No 29: The Effects of Economic and Political Freedom on CO2 Emissions

Fredrik Carlsson () and Susanna Lundström
Additional contact information
Fredrik Carlsson: Department of Economics, School of Economics and Commercial Law, Göteborg University, Postal: Box 640, SE 405 30 GÖTEBORG
Susanna Lundström: Department of Economics, School of Economics and Commercial Law, Göteborg University, Postal: Box 640, SE 405 30 GÖTEBORG

Abstract: In this paper we investigate the effects of political and economic freedom on CO2 emissions. As far as we know this is the first cross-country study of the relationship between economic freedom and environmental quality. Economic freedom is measured in several ways. We find that increased price stability and legal structure decrease emissions in countries with a small industry share of GDP, but increases emissions in countries with a large industry share of GDP. The decreasing effect from increased use of market is significant but non-robust, and increased freedom to trade does not have any significant effect. The effect of political freedom on CO2 emissions is insignificant, most probably since CO2 emissions is a global environmental problem and hence subject to free-riding by the individual countries.

Keywords: Carbon Dioxide; Economic Freedom; Institutions; Political Freedom

JEL-codes: O10; O40

16 pages, First version: September 27, 2000. Revised: February 21, 2003. Earlier revisions: August 21, 2001.

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