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Environmental Compliance, Corruption and Governance: Theory and Evidence on Forest Stock in Developing Countries

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  • Sébastien MARCHAND

    ()
    (Centre d'Etudes et de Recherches sur le Développement International)

  • Gaoussou DIARRA

    (Centre d'Etudes et de Recherches sur le Développement International)

Abstract

This paper analyses the relationships between environmental compliance, corruption and environmental regulations in the case of forestry. Using a Principal-Agent model, we highlight interrelationships between firm's environmental non-compliance and corruption conditioned to the efficiency of the legal and regulatory framework. Moreover, we show that environmental compliance and judicial efficiency may be complementary or substitutable depending on the level of judicial efficiency to strengthen the forest stock. After having design a new indicator of environmental compliance, we test these predictions using cross section data for 59 developing countries. The empirical results support the predictions of the model. Judicial efficiency reduces corruption and environmental non compliance which are positively correlated and conditioned to judicial efficiency. We also find empirical evidences on the substitutability and complementarity of environmental compliance and judicial efficiency to preserve the forest stock.

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File URL: http://publi.cerdi.org/ed/2011/2011.01.pdf
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Bibliographic Info

Paper provided by CERDI in its series Working Papers with number 201101.

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Length: 36
Date of creation: 2011
Date of revision:
Handle: RePEc:cdi:wpaper:1231

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Keywords: corruption; Environmental compliance; Forest Stock; political economy; governance;

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  1. Rafael La Porta & Florencio Lopez-de-Silanes & Cristian Pop-Eleches & Andrei Shleifer, 2004. "Judicial Checks and Balances," Journal of Political Economy, University of Chicago Press, vol. 112(2), pages 445-470, April.
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