The Economic Cost of Nationalism

Tao, Miaomiao and Saadaoui, Jamel (2025): The Economic Cost of Nationalism.

Abstract

We identify the negative influence of nationalist sentiment on economic growth. Our cross-country evidence confirms the growth-depressing effect of nationalism, projecting that economic growth has been constrained by roughly 12 percent over thirty years. This conclusion is robust across various tests. Paradoxically, nationalism helps reduce environmental damage, lowering overall emissions and intensity, especially in the building, industry, and transportation sectors. We observe that the effect of nationalism in cutting carbon emissions weakens slightly as GDP per capita rises. However, in poorer countries, this environmental impact remains steady regardless of changes in income, suggesting nationalism’s role in reducing emissions stays stable despite economic growth.

• Item Type: MPRA Paper
• Language: English
• Keywords: Nationalism; Economic Growth; Political Economy; Environmental Impact
• Subjects: F - International Economics > F5 - International Relations, National Security, and International Political Economy; F - International Economics > F5 - International Relations, National Security, and International Political Economy > F52 - National Security ; Economic Nationalism; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O40 - General; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O47 - Empirical Studies of Economic Growth ; Aggregate Productivity ; Cross-Country Output Convergence

References

Acemoglu, D., Johnson, S., Robinson, J.A., 2005. Chapter 6 Institutions as a Fundamental Cause of Long-Run Growth, in: Aghion, P., Durlauf, S.N. (Eds.), Handbook of Economic Growth. Elsevier, pp. 385-472.

Acemoglu, D., Naidu, S., Restrepo, P., Robinson, J.A., 2018. Democracy Does Cause Growth. Journal of Political Economy 127, 47-100.

Aklin, M., Urpelainen, J., 2013. Political Competition, Path Dependence, and the Strategy of Sustainable Energy Transitions. American Journal of Political Science 57, 643-658.

Alvarez, J., Arellano, M., 2003. The Time Series and Cross-Section Asymptotics of Dynamic Panel Data Estimators. Econometrica 71, 1121-1159.

Angrist, J.D., Kuersteiner, G.M., 2011. Causal Effects of Monetary Shocks: Semiparametric Conditional Independence Tests with a Multinomial Propensity Score. The Review of Economics and Statistics 93, 725-747.

Angrist, J.D., Òscar, J., and Kuersteiner, G.M., 2018. Semiparametric Estimates of Monetary Policy Effects: String Theory Revisited. Journal of Business & Economic Statistics 36, 371-387.

Arellano, M., Bond, S., 1991. Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations. The Review of Economic Studies 58, 277-297.

Bailey, M., Cao, R., Kuchler, T., Stroebel, J., 2018. The Economic Effects of Social Networks: Evidence from the Housing Market. Journal of Political Economy 126, 2224-2276.

Banks, A.S., Wilson, K.A., 2013. Cross-National Time-Series Data Archive, in: International, J.D. (Ed.).

Bavelas, A., 1950. Communication Patterns in Task‐Oriented Groups. The Journal of the Acoustical Society of America 22, 725-730. Bieber, F., 2018. Is Nationalism on the Rise? Assessing Global Trends. Ethnopolitics 17, 519-540.

Bonacich, P., 1972. Factoring and Weighting Approaches to Status Scores and Clique Identification. The Journal of mathematical sociology 2, 113-120.

Born, B., Müller, G.J., Schularick, M., Sedláček, P., 2019. The Costs of Economic Nationalism: Evidence from the Brexit Experiment*. The Economic Journal 129, 2722-2744.

Braun, M., 2021. Why nationalism is not the right doctrine to combat climate change – A Central European perspective. New Perspectives 29, 197-201.

Byrne, M.M., 1997. Is growth a dirty word? Pollution, abatement and endogenous growth. Journal of Development Economics 54, 261-284.

Colantone, I., Stanig, P., 2018. The Trade Origins of Economic Nationalism: Import Competition and Voting Behavior in Western Europe. American Journal of Political Science 62, 936-953.

Conversi, D., Friis Hau, M., 2021. Green nationalism. Climate action and environmentalism in left nationalist parties. Environmental Politics 30, 1089-1110.

Dechezleprêtre, A., Glachant, M., Ménière, Y., 2013. What Drives the International Transfer of Climate Change Mitigation Technologies? Empirical Evidence from Patent Data. Environmental and Resource Economics 54, 161-178.

Fan, Y., Jiang, Y., Jin, P., Mai, Y., 2023. CEO network centrality and bank risk: Evidence from US Bank holding companies. Journal of Corporate Finance 83, 102501.

Freeman, L.C., 1977. A Set of Measures of Centrality Based on Betweenness. Sociometry 40, 35-41.

Gaies, B., Nakhli, M.S., Sahut, J.-M., 2022. What are the effects of economic globalization on CO2 emissions in MENA countries? Economic Modelling 116, 106022.

Gartzke, E., Rohner, D., 2011. The Political Economy of Imperialism, Decolonization and Development. British Journal of Political Science 41, 525-556.

Gellner, E., 2015. Nations and nationalism, Conflict after the Cold War. Routledge, pp. 378-389.

Greenfeld, L., 2001. The Spirit of Nationalism: Nationalism and Economic Growth.

Grossman, G.M., Krueger, A.B., 1995. Economic Growth and the Environment*. The Quarterly Journal of Economics 110, 353-377.

Guriev, S., Papaioannou, E., 2022. The Political Economy of Populism. Journal of Economic Literature 60, 753-832.

Hafner-Burton, E.M., Kahler, M., Montgomery, A.H., 2009. Network Analysis for International Relations. International Organization 63, 559-592.

Haim, D.A., 2016. Alliance networks and trade: The effect of indirect political alliances on bilateral trade flows. Journal of Peace Research 53, 472-490.

Imbens, G.W., Wooldridge, J.M., 2009. Recent Developments in the Econometrics of Program Evaluation. Journal of Economic Literature 47, 5-86.

Jackson, M.O., 2020. A typology of social capital and associated network measures. Social Choice and Welfare 54, 311-336.

Jordà, Ò., 2005. Estimation and Inference of Impulse Responses by Local Projections. American Economic Review 95, 161-182.

Kline, R.B., 2011. Principles and practice of structural equation modeling, 3rd ed. The Guilford Press, New York, NY, US.

Lane, P.R., Milesi-Ferretti, G.M., 2007. The external wealth of nations mark II: Revised and extended estimates of foreign assets and liabilities, 1970–2004. Journal of International Economics 73, 223-250.

Levin, A., Lin, C.-F., James Chu, C.-S., 2002. Unit root tests in panel data: asymptotic and finite-sample properties. Journal of Econometrics 108, 1-24.

List, F., 1827. The National System of Political Economy, London: Longmans, Green and Co., 1909.

Mansfield, E.D., Pevehouse, J.C., 2006. Democratization and International Organizations. International Organization 60, 137-167.

Miller-Idriss, C., 2017. The Extreme Gone Mainstream: Commercialization and Far Right Youth Culture in Germany. Princeton University Press.

Mithani, M.A., 2024. Nationalistic political rhetoric: measurement and preliminary insights. Journal of International Management 30, 101086.

Moore, S., Roberts, A., 2022. The rise of ecofascism: Climate change and the far right. John Wiley & Sons.

Moriconi, S., Peri, G., Turati, R., 2022. Skill of the immigrants and vote of the natives: Immigration and nationalism in European elections 2007–2016. European Economic Review 141, 103986.

Mylonas, H., Tudor, M., 2021. Nationalism: What We Know and What We Still Need to Know. Annual Review of Political Science 24, 109-132.

Nickell, S., 1981. Biases in Dynamic Models with Fixed Effects. Econometrica 49, 1417-1426.

Rammal, H.G., Rose, E.L., Ghauri, P.N., Ørberg Jensen, P.D., Kipping, M., Petersen, B., Scerri, M., 2022. Economic nationalism and internationalization of services: Review and research agenda. Journal of World Business 57, 101314.

Ritchie, H., Roser, M., 2020. CO₂ emissions Published online at OurWorldinData.org.

Rodríguez-Pose, A., Bartalucci, F., 2024. The green transition and its potential territorial discontents. Cambridge Journal of Regions, Economy and Society 17, 339-358.

Rodrik, D., 2021. Why Does Globalization Fuel Populism? Economics, Culture, and the Rise of Right-Wing Populism. Annual Review of Economics 13, 133-170.

Russo, F.F., 2021. Immigration and nationalism: The importance of identity. European Economic Review 137, 103781. Sabidussi, G., 1966. The centrality index of a graph. Psychometrika 31, 581-603.

Torras, M., Boyce, J.K., 1998. Income, inequality, and pollution: a reassessment of the environmental Kuznets Curve. Ecological Economics 25, 147-160.

Wang, P., Liu, P., Li, Y., Teng, F., Pedrycz, W., 2024. Trust exploration- and leadership incubation-based opinion dynamics model for social network group decision-making: A quantum theory perspective. European Journal of Operational Research 317, 156-170.

Wasserman, S., Faust, K., 1994. Social Network Analysis: Methods and Applications. Cambridge, UK: Cambridge University Press.