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The political economy of investment: The case of pollution control technology

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  • Fredriksson, Per G.
  • Wollscheid, Jim R.

Abstract

This paper seeks to explain the implications of corruption and political instability for firm investment in abatement technology. In our theoretical set-up, a firm has an incentive to under-invest in abatement technology in order to gain a political advantage. The prediction that emerges is that greater corruptibility increases the level of abatement technology investment. This occurs because the strategic incentive to under-invest in pollution control technology declines when policymakers become more corruptible. Moreover, the model predicts that political instability raises abatement technology investment. Using steel-sector panel data from 41 countries for the years 1992-1998, we find empirical support for these predictions.

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Bibliographic Info

Article provided by Elsevier in its journal European Journal of Political Economy.

Volume (Year): 24 (2008)
Issue (Month): 1 (March)
Pages: 53-72

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Handle: RePEc:eee:poleco:v:24:y:2008:i:1:p:53-72

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Web page: http://www.elsevier.com/locate/inca/505544

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References

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Citations

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Cited by:
  1. Erdogdu, E., 2012. "The political economy of electricity market liberalization: a cross-country approach," Cambridge Working Papers in Economics 1227, Faculty of Economics, University of Cambridge.
  2. Caporale, Guglielmo Maria & Rault, Christophe & Sova, Robert & Sova, Anamaria, 2010. "Pollution Abatement and Control Expenditure in Romania: A Multilevel Analysis," IZA Discussion Papers 5041, Institute for the Study of Labor (IZA).
  3. David Popp & Richard G. Newell & Adam B. Jaffe, 2009. "Energy, the Environment, and Technological Change," NBER Working Papers 14832, National Bureau of Economic Research, Inc.
  4. Erdogdu, Erkan, 2013. "Essays on Electricity Market Reforms: A Cross-Country Applied Approach," MPRA Paper 47139, University Library of Munich, Germany.
  5. Tim Friehe & Eric Langlais, 2014. "On the Political Economy of Public Safety Investments," EconomiX Working Papers 2014-8, University of Paris West - Nanterre la Défense, EconomiX.
  6. Tideman, T. Nicolaus & Plassmann, Florenz, 2010. "Pricing externalities," European Journal of Political Economy, Elsevier, vol. 26(2), pages 176-184, June.
  7. Aidt, Toke S., 2010. "Green taxes: Refunding rules and lobbying," Journal of Environmental Economics and Management, Elsevier, vol. 60(1), pages 31-43, July.
  8. Tim Friehe, 2013. "The Role of Investment in Environmental Lobbying Contests," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 56(3), pages 337-352, November.
  9. Beekman, Gonne & Bulte, Erwin H. & Nillesen, Eleonora E.M., 2013. "Corruption and economic activity: Micro level evidence from rural Liberia," European Journal of Political Economy, Elsevier, vol. 30(C), pages 70-79.
  10. Lovely, Mary & Popp, David, 2011. "Trade, technology, and the environment: Does access to technology promote environmental regulation?," Journal of Environmental Economics and Management, Elsevier, vol. 61(1), pages 16-35, January.
  11. Menegaki, Angeliki N. & Ozturk, Ilhan, 2013. "Growth and energy nexus in Europe revisited: Evidence from a fixed effects political economy model," Energy Policy, Elsevier, vol. 61(C), pages 881-887.

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