| Abstract: |
This paper analyzes the macroeconomic effects of environmental policy
transitions using stringency scores from developed and emerging countries. We
examine the economic effects of environmental policy transitions across
market-based, non-market-based, and technology support policies, along with
their aggregate effect captured by the Environmental Policy Stringency index.
To assess the economic effects relative to a no-transition scenario, we apply
the synthetic control estimation method to construct separate counterfactuals
for each treated country and policy category. Our framework standardizes the
selection of treatment countries, event years, predictor variables, and donor
pools, and incorporates placebo tests to assess the significance of total
economic losses. We find that most policy transitions are associated with
short-term economic losses, particularly for non-market-based and technology
support policies. Placebo tests reveal that technology support transitions
generate the largest and most significant losses, while aggregated
environmental policy transitions generate smaller but still significant
losses. In contrast, market-based and non-market-based policies do not show
significant economic effects. These findings highlight the heterogeneous
economic responses to environmental policy transitions and demonstrate that,
although short-term losses can be substantial, more stringent market-based and
non-market-based policies do not inherently constrain long-term economic
performance. |