Can Welfare States Decouple Well-Being from Emissions? Evidence from OECD Panel Data

Abstract

This thesis examines whether OECD countries can improve multidimensional well-being without increasing ecological pressure. Using fixed-effects panel models for 33 OECD countries over 2001–2019, it estimates within-country associations for (i) the Human Development Index (HDI) and (ii) log per-capita CO₂ emissions. Social expenditure (as a percent of GDP) is robustly associated with higher HDI, even after controlling for structural and demographic factors. Environmental policy stringency is also positively associated with HDI. In contrast, neither social expenditure nor environmental policy stringency shows a statistically significant association with territorial CO₂ emissions once energy use is accounted for. Energy consumption remains the dominant correlate of emissions, with an elasticity of approximately 0.78. The results suggest that welfare-state expansion is associated with higher human development, with no statistically significant increase in emissions in the short run. However, that meaningful decarbonization depends primarily on the structural transformation of energy systems. These findings suggest that OECD countries may need to prioritize structural energy system transformation alongside welfare state expansion, as social policies can secure human development without proportionally increasing ecological pressure in the short run.