Varieties of capitalism and environmental performance

Abstract

This paper investigates the role of institutions in decoupling economic growth from environmental impacts, employing the Varieties of Capitalism framework. It finds that Northern European countries have achieved more significant decoupling than other Western OECD countries since the 1980s, as measured by the Ecological Footprint of Consumption. Differences in corporatism, as well as the amount and type of public social expenditures, are hypothesized to play a crucial role in explaining this pattern. Multiple regression analysis reveals that larger proportions of GDP allocated to universal social expenditures — not contingent on work status — are robustly associated with stronger decoupling. This suggests that the considerable investments of Northern European countries in universal social benefits have been key for effectively reducing the environmental impacts associated with economic growth.