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The political economy of investment: The case of pollution control technology

  • Fredriksson, Per G.
  • Wollscheid, Jim R.

This paper seeks to explain the implications of corruption and political instability for firm investment in abatement technology. In our theoretical set-up, a firm has an incentive to under-invest in abatement technology in order to gain a political advantage. The prediction that emerges is that greater corruptibility increases the level of abatement technology investment. This occurs because the strategic incentive to under-invest in pollution control technology declines when policymakers become more corruptible. Moreover, the model predicts that political instability raises abatement technology investment. Using steel-sector panel data from 41 countries for the years 1992-1998, we find empirical support for these predictions.

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Article provided by Elsevier in its journal European Journal of Political Economy.

Volume (Year): 24 (2008)
Issue (Month): 1 (March)
Pages: 53-72

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Handle: RePEc:eee:poleco:v:24:y:2008:i:1:p:53-72
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505544

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