National Culture and Environmental Sustainability: A Cross-National Analysis

By Park, Hoon; Russell, Clifford et al. | Journal of Economics and Finance, Spring 2007 | Go to article overview

National Culture and Environmental Sustainability: A Cross-National Analysis


Park, Hoon, Russell, Clifford, Lee, Junsoo, Journal of Economics and Finance


Abstract

This paper demonstrates the significance of culture in examining the relationship between income and the environment. Specifically, we examine the relationship among scores on the Environmental Sustainability Index of the World Economic Forum and the four dimensions of national culture proposed and measured by Hofstede (1983). We find that there are significant multidimensional interrelationships among the cultural and environmental sustainability measures. As an important application, we examine the Environmental Kuznets Curve (EKC) phenomenon. Our finding suggests the limited applicability of the EKC notion when cultural variables are included in the model.

(JEL O5, Z1, Q2)

Introduction

The emergence of debate on the environment has attracted attention regarding a possible contradiction between promoting free markets and meeting domestic environmental objectives. In particular, there has been a concern for environmental degradation in the process of growth and globalization, since damage to the environment is thought by some to be linked to increased economic activity. Given the interdependent and trans-boundary nature of collective exhaustible and renewable natural resources, environmental issues are more subtle. The popular view among the environmental NGOs based on the pollution-haven hypothesis posits that trade liberalization, open markets, increased foreign direct investment and multinational corporations (MNCs, hereafter) will encourage the flow of low-technology and polluting industries to developing countries and trigger a 'race to the bottom' in environmental standards. [See Xing and Kolstad (2002), Goldsmith (1997), Gersh (1999), and Tonelson (2000)]. The other view, the pollution-halo hypothesis, suggests that trade liberalization or foreign direct investment encouraged by the MNCs may actually help elevate worldwide environmental standards through the transfer of efficient technology and established management practices. [See Gentry (1998), Blackman and Wu (1998), Dowell et al. (2000), and Eskeland and Harrison (2002)].

Grossman and Krueger (1995) examined a closely related, and perhaps broader, question asking whether economic growth itself harms the environment. They found an inverted U-shaped relationship between income growth and environmental conditions. That is, environmental conditions, such as air pollution and contamination, seem to worsen with increases in income in low-income countries, and appear to benefit from economic growth once some critical level of income has been reached. This result is often called the Environmental Kuznet Curve (EKC, hereafter) phenomenon in the literature. The EKC has been examined by many researchers and found to be far from universal. It appears for some pollutants and not others; for some groups of countries and not others; and for some econometric-technique/data combinations and not others; see for example, Stern and Common (2001) for a summary, critique and extension of the EKC literature on sulfur emissions.

One potential caveat in these studies is that they fail to account for the effect of culture. It can be reasonably conjectured that the will and ability to protect the environment are influenced by intra-country socio-cultural factors. If people are more culturally conscious of environmental conditions, a higher level of environmental sustainability can be maintained, and if environmental damages occur, they can be restored more quickly. In this scenario, national culture is expected to influence how people utilize their natural resources and environments by shaping their attitudes and perceptions. Herein lays the importance of empirically determining the significance of national culture on environmental conditions. Despite this, however, a majority of the relevant work on this issue in the literature has been anecdotal and descriptive.

The purpose of the present paper is to provide some modest first steps in the search for greater understanding of the statistical relationship between elements of culture and environmental sustainability. …

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