Cultural Persistence in Corruption, Economic Growth, and the Environment

Evidence that attributes current environmental outcomes to historical and cultural origins has gained momentum in recent years. In this study, I construct a model to demonstrate why the relation between economic growth and environmental quality hinges on the deeply rooted cultural traits that govern attitudes towards corruption. Specifically, I show that the cultural transmission of the traits that determine the corruptibility of public officials, who are entrusted with the inspection and reporting of firms’ emissions, leads to history-dependant outcomes. It sets in motion either a vicious circle of corruption, high pollution and low economic growth, or a virtuous circle where corruption does not infringe environmental policy, pollution is lower and economic growth is higher. These outcomes have major policy implications.