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Is Abatement Effective in the Presence of Corruption? A Theoretical Exploration

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Listed:
  • Athanasios Lapatinas

    (University of Ioannina)

  • Anastasia Litina

    (CREA, Université du Luxembourg)

  • Eftichios Sophocles Sartzetakis

    (University of Macedonia)

Abstract

The paper introduces an additional channel via which corruption may adversely affect environmental quality. It is argued that, in the presence of corruption, politicians may allocate a large fraction of public funds to environmental projects aiming not at improving environmental quality, but rather at increasing their ability to extract rents. This type of behavior has a direct and an indirect effect on environmental quality. First, due to extensive rent-seeking, the effectiveness of environmental projects is disproportional to the amount of public funds allocated to them. Second, citizens who observe the poor outcome of environmental projects, increase tax evasion thus reducing public funds. A vicious circle of extensive tax evasion and rent seeking activities emerges, that has a detrimental effect on envi- ronmental quality. Anecdotal evidence from a number of countries that experience high levels of corruption shows little or no improvements in environmental quality despite the implementation of environmental projects. In line with our theoretical findings, this ineffectiveness of the environmental policy is present even when the technology involved is advanced.

Suggested Citation

  • Athanasios Lapatinas & Anastasia Litina & Eftichios Sophocles Sartzetakis, 2014. "Is Abatement Effective in the Presence of Corruption? A Theoretical Exploration," DEM Discussion Paper Series 14-29, Department of Economics at the University of Luxembourg.
    • Handle: RePEc:luc:wpaper:14-29
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    File URL: https://hdl.handle.net/10993/19423
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    More about this item

    Keywords

    Corruption; Environment; Technology;
    All these keywords.

    JEL classification:

    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption

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