U.S. Economic Growth vs. Environmental Conditions

A widely-held belief is that stricter environmental regulations stifle economic growth. To determine empirically the effect of environmental conditions and policies on state-level per capita income growth, a Barro-type economic growth model was estimated for the years 1982 to 1991, which correspond to two consecutive troughs in the business cycle. States with better environmental conditions had significantly higher income growth rates during this period. At the same time, stricter environmental policies did not significantly depress income growth. Data used include recently developed, consistent measures of environmental policy and quality for individual states, as well as data from the 1980 U.S. Census and Bureau of Economic Analysis.