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Politically Connected Firms and the Environment

Author

Listed:
  • Yu Haowei

    (College of Economics, Jinan University, Guangzhou, Guangdong 510632, China)

  • Zhang Lin

    (School of Energy and Environment, City University of Hong Kong, Kowloon, Hong Kong SAR, China)

Abstract

This paper examines the environmental effect of political connections at the individual and organizational levels. We integrate political connections at both levels in a four-stage game-theoretic framework to study the political interplay between an entrepreneur, a bureaucrat and a government. We distinguish individual-level political connections from bribery and argue that while the latter is generally more efficient for the firm aiming to reduce environmental tax payments, political connections become more appealing when the bureaucrat places a higher value on indirect non-monetary benefits. We find that individual-level political connections are associated with more emission discharges by the firm, while the effect of organizational-level political connections on emissions depends on a negative interaction effect between political connections at different levels and a positive resource-reallocation effect between abatement activities and production.

Suggested Citation

  • Yu Haowei & Zhang Lin, 2022. "Politically Connected Firms and the Environment," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 22(2), pages 579-602, June.
    • Handle: RePEc:bpj:bejtec:v:22:y:2022:i:2:p:579-602:n:10
    DOI: 10.1515/bejte-2020-0167
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    Citations

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    Cited by:

    1. Torsten Müller & Thorsten Schulten, 2022. "Die europäische Mindestlohn-Richtlinie – Paradigmenwechsel hin zu einem Sozialen Europa," Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 48(3), pages 335-364.
    2. Haowei Yu & Ruoyu Wang & Ling‐Yun He, 2023. "Environmental implications of political connections and state ownership: Theory and evidence from China," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(2), pages 1228-1253, March.

    More about this item

    Keywords

    political connections; emissions; bribery; C70; D72; Q53;
    All these keywords.

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling

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