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Fiscal decentralization and Pollution: Institutions Matter

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  • Mohammad Reza Farzanegan

    ()
    (University of Marburg)

  • Tim Mennel

    ()
    (Center for European Economic Research (ZEW))

Abstract

We estimate the impact of fiscal decentralization on different indicators of pollution for more than 80 countries from 1970 to 2000. Our cross country estimates show that fiscal decentralization increases pollution. However, higher quality of institutions can limit the destructive environmental effects of decentralization. The empirical results confirm a strand of the literature on decentralization that predicts a “race to the bottom” under federalism. The mitigating effect of good governance can be explained by relative preferences of local and central governments for environmental quality.

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File URL: https://www.uni-marburg.de/fb02/makro/forschung/magkspapers/22-2012_farzanegan.pdf
File Function: First version, 2012
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Bibliographic Info

Paper provided by Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) in its series MAGKS Papers on Economics with number 201222.

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Length: 29 pages
Date of creation: 2012
Date of revision:
Publication status: Forthcoming in
Handle: RePEc:mar:magkse:201222

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Keywords: decentralization; pollution; environmental quality; institutions;

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