emissions between 1996 and 2001. Was this emission reduction just the fortuitous result of the major economic transformation undergone by those countries in the transition away from a centralized plan economy ? Or is the emission reduction rather a result of more stringent environmental policy ? The objective of the article is to answer this question through a model of the relation between environmental quality and enforcement, on the one hand, and environmental quality and economic growth, on the other hand. We develop structural equations for the demand (emissions) and supply (environmental stringency) of pollution. The supply equation takes into account the institutional quality of the country (control of corruption and political stability) as well as consumer preferences for environmental quality, as proxied by per capita revenue and unemployment. The system is estimated by three stage least squares on a sample of three groups of countries for comparative analysis : Central and Eastern European countries, Western European countries and emerging economies. The results indicate that, all else equal, the scale effect on its own would have increased industrial CO2 emissions in the Central and Eastern European countries in our sample by 44,6% between 1996 and 2001. The composition effect accounted for a corresponding reduction in emissions by 16%. The technique effect had the largest marginal impact corresponding to a 37,4% reduction in emissions.
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