Environmental Regulation and Development: A Cross-Country Empirical Analysis

April 1995 Environmental protection has not been restricted to wealthy nations. Starting at the lowest level of development, regulation increases steadily with income per capita. The characteristic progression is from natural resource protection, through regulation of water pollution, to air pollution control. Dasgupta, Mody, Roy, and Wheeler develop comparative indices of environmental policy and performance for 31 countries using a quantified analysis of reports prepared for the United Nations Conference on Environment and Development. In cross-country regressions, they find a very strong, continuous association between their indicators and national income per capita, particularly when adjusted for purchasing power parity. Their results suggest a characteristic progression in development. Poor agrarian economies focus first on natural resource protection. With increased urbanization and industrialization, countries move from initial regulation of water pollution to air pollution control. The authors highlight the importance of institutional development. Environmental regulation is more advanced in developing countries with relatively secure property rights, effective legal and judicial systems, and efficient public administration. This paper -- a product of the Environment, Infrastructure, and Agriculture Division, Policy Research Department -- is part of a larger effort in the department to study the relationship between environmental regulation and economic development. The authors may be contacted at sdasgupta@worldbank.org(link sends e-mail), amody@worldbank.org(link sends e-mail), or dwheeler1@worldbank.org(link sends e-mail).