Environmental Policy Stringency as a Catalyst for Breaking the Resource Curse Phenomena: Empirical and theoretical insights from the top ten green economies

The study aims to determine whether environmental policy stringency (EPS) help countries in breaking the resource curse phenomena. This paper integrates environmental policy stringency (EPS), resource development of resource and economic growth in a unified approach by introducing endogenous model of growth with four sectors. Next, the study calculates the coefficients of resource curse of ten top green economies namely Sweden, Denmark, United Kingdom, Switzerland, Ireland, France, Iceland, Norway, Finland, and Costa Rica. Ultimately, the focus of this research is to examine the impact of environmental policy stringency (EPS) on resource curse and its mechanisms. The results showed that there are four countries with highest resource curse coefficient and four countries with lowest coefficient of resource curse. Ireland, Iceland, Costa Rica, and Norway are the four economies with the higher coefficient of resource curse. These countries heavily depend on natural resources for manufacturing but their inefficient utilization. Moreover, the results indicate presence of inverted U connection between EPS and resource curse. Put simply, findings show that turning point exist when EPS mitigates the adverse effect of resource curse. Furthermore, the study if EPS reaches at a certain level, EPS helps economies in mitigating the adverse consequences of resource curse. This paper also uncovered that in full samples both market based and non-market based environmental policies can help to indirectly break the resource curse though accelerating the development of manufacturing, promoting the level of green technologies, minimizing the greater dependence on natural resources. Researchers also recommended that the government should enact stringent and stronger environmental policies for protection of the environment. Implementing this measure will have a beneficial effect on the overall environment as well as the whole green economies.