Pollution, shadow economy and corruption: Theory and evidence
We study how the shadow economy affects pollution and how this effect depends on corruption levels in public administration. Production in the shadow economy allows firms to avoid environmental regulation policies; a large informal sector may be accompanied by higher pollution levels. Our theoretical model predicts that controlling the levels of corruption can limit the effect of the shadow economy on pollution. We use panel data covering the period from 1999 to 2005 in more than 100 countries to test this theoretical prediction. Our estimates confirm that the relationship between the shadow economy and the levels of pollution are dependent on the levels of corruption. Our results hold when we control for the effects of other determinants of pollution, time varying common shocks, country-fixed effects and various additional covariates.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Fredriksson, Per G. & Svensson, Jakob, 2003. "Political instability, corruption and policy formation: the case of environmental policy," Journal of Public Economics, Elsevier, vol. 87(7-8), pages 1383-1405, August.
- Choi, Jay Pil & Thum, Marcel, 2003.
"Corruption and the shadow economy,"
Dresden Discussion Paper Series in Economics
02/03, Dresden University of Technology, Faculty of Business and Economics, Department of Economics.
- Gene M. Grossman & Alan B. Krueger, 1994.
"Economic Growth and the Environment,"
NBER Working Papers
4634, National Bureau of Economic Research, Inc.
- Friedl, Birgit & Getzner, Michael, 2003. "Determinants of CO2 emissions in a small open economy," Ecological Economics, Elsevier, vol. 45(1), pages 133-148, April.
- Stern, David I., 2004.
"The Rise and Fall of the Environmental Kuznets Curve,"
Elsevier, vol. 32(8), pages 1419-1439, August.
- David I. Stern, 2003. "The Rise and Fall of the Environmental Kuznets Curve," Rensselaer Working Papers in Economics 0302, Rensselaer Polytechnic Institute, Department of Economics.
- Choi, Jay Pil & Thum, Marcel, 2003.
"The economics of repeated extortion,"
Dresden Discussion Paper Series in Economics
13/03, Dresden University of Technology, Faculty of Business and Economics, Department of Economics.
- Feige, Edgar L, 1994.
"The Underground Economy and the Currency Enigma,"
Public Finance = Finances publiques,
, vol. 49(Supplemen), pages 119-36.
- Stephen Knack & Philip Keefer, 1995. "Institutions And Economic Performance: Cross-Country Tests Using Alternative Institutional Measures," Economics and Politics, Wiley Blackwell, vol. 7(3), pages 207-227, November.
- Mohammad Reza Farzanegan, 2008.
"Illegal Trade in the Iranian Economy: Evidence from a Structural Model,"
CESifo Working Paper Series
2397, CESifo Group Munich.
- Farzanegan, Mohammad Reza, 2009. "Illegal trade in the Iranian economy: Evidence from a structural model," European Journal of Political Economy, Elsevier, vol. 25(4), pages 489-507, December.
- Mohammad Reza Farzanegan, 2008. "Illegal Trade in the Iranian Economy: Evidence from a Structural Model," Working Papers 409, Economic Research Forum, revised Jun 2008.
- Scruggs, Lyle A., 1998. "Political and economic inequality and the environment," Ecological Economics, Elsevier, vol. 26(3), pages 259-275, September.
- Bimonte, Salvatore, 2002. "Information access, income distribution, and the Environmental Kuznets Curve," Ecological Economics, Elsevier, vol. 41(1), pages 145-156, April.
- Friedrich Schneider & Andreas Buehn & Claudio E. Montenegro, 2011.
"Shadow Economies All Over the World: New Estimates for 162 Countries from 1999 to 2007,"
in: Handbook on the Shadow Economy, chapter 1
Edward Elgar Publishing.
- Friedrich Schneider & Andreas Buehn & Claudio E. Montenegro, 2010. "Shadow Economies All over the World: New Estimates for 162 Countries from 1999 to 2007," Working Papers wp322, University of Chile, Department of Economics.
- Schneider, Friedrich & Buehn, Andreas & Montenegro, Claudio E., 2010. "Shadow economies all over the world : new estimates for 162 countries from 1999 to 2007," Policy Research Working Paper Series 5356, The World Bank.
- Alesina, Alberto & Weder, Beatrice, 2002.
"Do Corrupt Governments Receive Less Foreign Aid?,"
4553011, Harvard University Department of Economics.
- Torras, Mariano & Boyce, James K., 1998. "Income, inequality, and pollution: a reassessment of the environmental Kuznets Curve," Ecological Economics, Elsevier, vol. 25(2), pages 147-160, May.
- Friedrich Schneider & Dominik Enste, 1999.
"Shadow Economies Around the World - Size, Causes, and Consequences,"
CESifo Working Paper Series
196, CESifo Group Munich.
- Friedrich Schneider & Dominik Enste, 2000. "Shadow Economies Around the World; Size, Causes, and Consequences," IMF Working Papers 00/26, International Monetary Fund.
- Dinda, Soumyananda & Coondoo, Dipankor & Pal, Manoranjan, 2000. "Air quality and economic growth: an empirical study," Ecological Economics, Elsevier, vol. 34(3), pages 409-423, September.
- Sambit Bhattacharyya & Roland Hodler, 2008.
"Natural Resources, Democracy and Corruption,"
Department of Economics - Working Papers Series
1047, The University of Melbourne.
- Hausman, Jerry A, 1978.
"Specification Tests in Econometrics,"
Econometric Society, vol. 46(6), pages 1251-71, November.
- Chang, Chingfu & Lee, Alice C. & Lee, Cheng F., 2009. "Determinants of capital structure choice: A structural equation modeling approach," The Quarterly Review of Economics and Finance, Elsevier, vol. 49(2), pages 197-213, May.
- Panayotou, Theodore, 1997. "Demystifying the environmental Kuznets curve: turning a black box into a policy tool," Environment and Development Economics, Cambridge University Press, vol. 2(04), pages 465-484, November.
- Farzin, Y. Hossein & Bond, Craig A., 2006. "Democracy and environmental quality," Journal of Development Economics, Elsevier, vol. 81(1), pages 213-235, October.
- Lambsdorff,Johann Graf, 2007. "The Institutional Economics of Corruption and Reform," Cambridge Books, Cambridge University Press, number 9780521872751, April.
- Selden Thomas M. & Song Daqing, 1994. "Environmental Quality and Development: Is There a Kuznets Curve for Air Pollution Emissions?," Journal of Environmental Economics and Management, Elsevier, vol. 27(2), pages 147-162, September.
- Welsch, Heinz, 2004.
"Corruption, growth, and the environment: a cross-country analysis,"
Environment and Development Economics,
Cambridge University Press, vol. 9(05), pages 663-693, October.
- Heinz Welsch, 2003. "Corruption, Growth, and the Environment: A Cross-Country Analysis," Discussion Papers of DIW Berlin 357, DIW Berlin, German Institute for Economic Research.
- Blackman, Allen & Bannister, Geoffrey J., 1998. "Community Pressure and Clean Technology in the Informal Sector: An Econometric Analysis of the Adoption of Propane by Traditional Mexican Brickmakers," Journal of Environmental Economics and Management, Elsevier, vol. 35(1), pages 1-21, January.
- Lopez, Ramon & Mitra, Siddhartha, 2000. "Corruption, Pollution, and the Kuznets Environment Curve," Journal of Environmental Economics and Management, Elsevier, vol. 40(2), pages 137-150, September.
- Blackman, Allen, 2000.
"Informal Sector Pollution Control: What Policy Options Do We Have?,"
Elsevier, vol. 28(12), pages 2067-2082, December.
- Blackman, Allen, 1999. "Informal Sector Pollution Control: What Policy Options Do We Have?," Discussion Papers dp-00-02-rev, Resources For the Future.
- Botero, J. C. & Djankov, S. & Porta, R. L. & Lopez-de-Silanes, F. & Shleifer, Andrei, 2004.
"The Regulation of Labor,"
27867241, Harvard University Department of Economics.
- Simeon Djankov & Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer & Juan Botero, 2003. "The Regulation of Labor," NBER Working Papers 9756, National Bureau of Economic Research, Inc.
- Juan Botero & Simeon Djankov & Rafael LaPorta & Florencio López-de-Silanes & Andrei Shleifer, . "The Regulation of Labor," Working Paper 19483, Harvard University OpenScholar.
- Cole, Matthew A., 2007. "Corruption, income and the environment: An empirical analysis," Ecological Economics, Elsevier, vol. 62(3-4), pages 637-647, May.
- Dondeyne, S. & Ndunguru, E. & Rafael, P. & Bannerman, J., 2009. "Artisanal mining in central Mozambique: Policy and environmental issues of concern," Resources Policy, Elsevier, vol. 34(1-2), pages 45-50.
- Chaudhuri, Sarbajit & Mukhopadhyay, Ujjaini, 2006. "Pollution and Informal Sector: A Theoretical Analysis," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 21, pages 363-378.
- Dominik H. Enste & Friedrich Schneider, 2000. "Shadow Economies: Size, Causes, and Consequences," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 77-114, March.
- Biller, Dan & DEC, 1994. "Informal gold mining and mercury pollution in Brazil," Policy Research Working Paper Series 1304, The World Bank.
- Andreas Buehn & Mohammad Reza Farzanegan, 2012.
"Smuggling around the world: evidence from a structural equation model,"
Taylor & Francis Journals, vol. 44(23), pages 3047-3064, August.
- Andreas Buehn & Mohammad Reza Farzanegan, 2011. "Smuggling around the World: Evidence from a Structural Equation Model," Post-Print hal-00710057, HAL.
- Soham Baksi & Pinaki Bose, 2010. "Environmental Regulation in the Presence of an Informal Sector," Departmental Working Papers 2010-03, The University of Winnipeg, Department of Economics.
- Mo, Pak Hung, 2001. "Corruption and Economic Growth," Journal of Comparative Economics, Elsevier, vol. 29(1), pages 66-79, March.
- Cole, Matthew A., 2004. "Trade, the pollution haven hypothesis and the environmental Kuznets curve: examining the linkages," Ecological Economics, Elsevier, vol. 48(1), pages 71-81, January.
- C. Dominguez-Pery, 2011. "Introduction," Post-Print halshs-00740570, HAL.
- Rivera-Batiz, Francisco L, 2002. "Democracy, Governance, and Economic Growth: Theory and Evidence," Review of Development Economics, Wiley Blackwell, vol. 6(2), pages 225-47, June.
- Meredith L. Fowlie, 2009. "Incomplete Environmental Regulation, Imperfect Competition, and Emissions Leakage," American Economic Journal: Economic Policy, American Economic Association, vol. 1(2), pages 72-112, August.
- Knack, Stephen & Keefer, Philip, 1995. "Institutions and Economic Performance: Cross-Country Tests Using Alternative Institutional Indicators," MPRA Paper 23118, University Library of Munich, Germany.
- Paolo Mauro, 1995. "Corruption and Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 110(3), pages 681-712.
- Cole, M.A. & Rayner, A.J. & Bates, J.M., 1997. "The environmental Kuznets curve: an empirical analysis," Environment and Development Economics, Cambridge University Press, vol. 2(04), pages 401-416, November.
When requesting a correction, please mention this item's handle: RePEc:eee:ecolec:v:75:y:2012:i:c:p:114-125. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.