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Electoral Incentives and Firm Behavior: Evidence from U.S. Power Plant Pollution Abatement

Author

Listed:
  • Matthew Doyle
  • Corrado Di Maria
  • Ian A. Lange
  • Emiliya Lazarova

Abstract

Researchers have utilized the fact that many states have term limits (as opposed to being eligible for re-election) for governors to determine how changes in electoral incentives alter state regulatory agency behavior. This paper asks whether these impacts spill over into private sector decision-making. Using data from gubernatorial elections in the U.S., we find strong evidence that power plants spend less in water pollution abatement if the governor of the state where the plant is located is a term-limited democrat. We show that this evidence is consistent with compliance cost minimization by power plants reacting to changes in the regulatory enforcement. Finally, we show that the decrease in spending has environmental impacts as it leads to increased pollution.

Suggested Citation

  • Matthew Doyle & Corrado Di Maria & Ian A. Lange & Emiliya Lazarova, 2016. "Electoral Incentives and Firm Behavior: Evidence from U.S. Power Plant Pollution Abatement," CESifo Working Paper Series 6127, CESifo.
    • Handle: RePEc:ces:ceswps:_6127
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    References listed on IDEAS

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    1. Beland, Louis-Philippe & Boucher, Vincent, 2015. "Polluting politics," Economics Letters, Elsevier, vol. 137(C), pages 176-181.
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    Cited by:

    1. Aaron A. Elrod & Serkan Karadas & Katherine C. Theyson, 2019. "The effect of gubernatorial political parties on monitoring and enforcement of federal environmental regulation: evidence from the Clean Water Act," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 21(2), pages 171-202, April.
    2. Englmaier, Florian & Roider, Andreas & Stowasser, Till & Hinreiner, Lisa, 2017. "Power Politics: Electoral Cycles in German Electricity Prices," VfS Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168267, Verein für Socialpolitik / German Economic Association.
    3. Raff, Zach & Meyer, Andrew & Walter, Jason M., 2022. "Political differences in air pollution abatement under the Clean Air Act," Journal of Public Economics, Elsevier, vol. 212(C).
    4. Blundell, Wesley, 2020. "When threats become credible: A natural experiment of environmental enforcement from Florida," Journal of Environmental Economics and Management, Elsevier, vol. 101(C).

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    More about this item

    Keywords

    political economy; electoral incentives; term limits; environmental policy; pollution abatement; compliance costs; power plants; water pollution; regression discontinuity;
    All these keywords.

    JEL classification:

    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • H76 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Other Expenditure Categories
    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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