Is economic growth good or bad for the environment? Recent empirical evidence points to a pattern reminiscent of the Kuznets curve: for a number of indicators of environmental quality (but not all), economic growth seems to be accompanied by a deterioration in environmental quality at low income levels and an improvement in environmental quality at high income levels.

It is widely believed that this relationship reflects an induced policy response: as nations become richer, their citizens demand that the non-material aspects of their standard of living be improved. But if this reasoning is correct, then the observed levels of environmental quality will depend on more than income; they will depend also on citizens being able to express their preferences for environmental quality and on governments having an incentive to satisfy these preferences by changing policy. In this paper we re-estimate the relations estimated by Grossman and Krueger (1995; hereafter, G-K), including as explanatory variables certain measures of civil and political freedoms. In essence, we ask a different question from the one above. We ask: Is more freedom good or bad for the environment?

For a number of measures of environmental quality, we find that our freedom variables are jointly highly significant. Inclusion of the freedom variables does not affect the qualitative nature of the relationship between pollution and per capita income or the associated turning points; we find no evidence that the results reported by G-K are biased. But our results do show that, for a number of different measures, environmental quality is increasing in the extent of civil and political freedoms. In this sense, our results suggest that more freedom is good for the environment. Moreover, the effect is quantitatively and not just statistically significant. In the case of sulfur dioxide the effect is especially strong: we find that a low-freedom country, with an income level near the peak of the inverted-U, can reduce its pollution at least as much by increasing its freedoms as it can by increasing its income per head. This is policy-relevant if, as we argue, freedoms can be controlled independently of incomes.

Levels of some measures of environmental quality, however, seem not to depend on freedoms, even when the underlying relationship exhibits a strong inverted-U. This hints that the downhill portion of the inverted-U may not always result from an induced policy response. We provide other evidence to back up this claim.