IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/39433.html
   My bibliography  Save this paper

Rule of law and its implications for the environmental taxation-income path across European Countries

Author

Listed:
  • Castiglione, Concetta
  • Infante, Davide
  • Smirnova, Janna

Abstract

Recent research has clearly demonstrated that economic development is closely related to environmental quality. In last two decades this relationship has been described by the Environmental Kuznets Curves that postulates an inverted U-shaped relationship between pollution and income. However, while theoretical and empirical research has focused on the polluting effects of economic development, few have identified the policy instruments which can be introduced to counteract such negative effects. This paper concentrates on one of these instruments and examines how environmental taxation is related to economic development. The introduction of environmental taxes usually requires strong regulation capabilities such as effective monitoring and enforcement. We assume that these capabilities reflect the integrity of the institution of rule of law and examine how the strength of rule of law affects the environmental taxation-income path. Data from 28 European countries analysed confirm the existence of an inverse U-shaped relationship between environmental taxation and per capita income. The empirical results clearly demonstrate that the environmental taxation-income relationship is strongly influenced by the rule of law which, when strong, ensures that environmental policies are implemented effectively. A strong rule of law thus contributes to achieving a turning point at lower levels of per capita income. Our analysis also made it possible to identify differences in environmental taxation-income paths among European countries, showing that post-transition economies may have not yet reached the turning point of the curve due to the presence of a weaker rule of law.

Suggested Citation

  • Castiglione, Concetta & Infante, Davide & Smirnova, Janna, 2012. "Rule of law and its implications for the environmental taxation-income path across European Countries," MPRA Paper 39433, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:39433
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/39433/1/MPRA_paper_39433.pdf
    File Function: original version
    Download Restriction: no

    References listed on IDEAS

    as
    1. Di Vita, Giuseppe, 2009. "Legal families and environmental protection: Is there a causal relationship?," Journal of Policy Modeling, Elsevier, vol. 31(5), pages 694-707, September.
    2. Stern, David I., 2004. "The Rise and Fall of the Environmental Kuznets Curve," World Development, Elsevier, vol. 32(8), pages 1419-1439, August.
    3. Butkiewicz, James L. & Yanikkaya, Halit, 2006. "Institutional quality and economic growth: Maintenance of the rule of law or democratic institutions, or both?," Economic Modelling, Elsevier, vol. 23(4), pages 648-661, July.
    4. Baumol, William J, 1972. "On Taxation and the Control of Externalities," American Economic Review, American Economic Association, vol. 62(3), pages 307-322, June.
    5. 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.
    6. Cole, Matthew A., 2007. "Corruption, income and the environment: An empirical analysis," Ecological Economics, Elsevier, vol. 62(3-4), pages 637-647, May.
    7. Anil Markandya & Alexander Golub & Suzette Pedroso-Galinato, 2006. "Empirical Analysis of National Income and SO 2 Emissions in Selected European Countries," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 35(3), pages 221-257, November.
    8. Galeotti, Marzio & Lanza, Alessandro & Pauli, Francesco, 2006. "Reassessing the environmental Kuznets curve for CO2 emissions: A robustness exercise," Ecological Economics, Elsevier, vol. 57(1), pages 152-163, April.
    9. Lans Bovenberg, A. & de Mooij, Ruud A., 1997. "Environmental tax reform and endogenous growth," Journal of Public Economics, Elsevier, vol. 63(2), pages 207-237, January.
    10. Vincent, Jeffrey R., 1997. "Testing for environmental Kuznets curves within a developing country," Environment and Development Economics, Cambridge University Press, vol. 2(04), pages 417-431, November.
    11. Damania, Richard & Fredriksson, Per G. & List, John A., 2003. "Trade liberalization, corruption, and environmental policy formation: theory and evidence," Journal of Environmental Economics and Management, Elsevier, vol. 46(3), pages 490-512, November.
    12. Leitão, Alexandra, 2010. "Corruption and the environmental Kuznets Curve: Empirical evidence for sulfur," Ecological Economics, Elsevier, vol. 69(11), pages 2191-2201, September.
    13. Bosquet, Benoit, 2000. "Environmental tax reform: does it work? A survey of the empirical evidence," Ecological Economics, Elsevier, vol. 34(1), pages 19-32, July.
    14. Culas, Richard J., 2007. "Deforestation and the environmental Kuznets curve: An institutional perspective," Ecological Economics, Elsevier, vol. 61(2-3), pages 429-437, March.
    15. Ekins, Paul & Barker, Terry, 2001. " Carbon Taxes and Carbon Emissions Trading," Journal of Economic Surveys, Wiley Blackwell, vol. 15(3), pages 325-376, July.
    16. Concetta Castiglione & Davide Infante & Janna Smirnova, 2012. "Rule of law and the environmental Kuznets curve: evidence for carbon emissions," International Journal of Sustainable Economy, Inderscience Enterprises Ltd, vol. 4(3), pages 254-269.
    17. Robert E. Hall & Charles I. Jones, 1999. "Why do Some Countries Produce So Much More Output Per Worker than Others?," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 83-116.
    18. Khanna, Neha & Plassmann, Florenz, 2004. "The demand for environmental quality and the environmental Kuznets Curve hypothesis," Ecological Economics, Elsevier, vol. 51(3-4), pages 225-236, December.
    19. Bimonte, Salvatore, 2002. "Information access, income distribution, and the Environmental Kuznets Curve," Ecological Economics, Elsevier, vol. 41(1), pages 145-156, April.
    20. Weisbuch, Gerard, 2000. "Environment and institutions: a complex dynamical systems approach," Ecological Economics, Elsevier, vol. 35(3), pages 381-391, December.
    21. Bradford David F. & Fender Rebecca A & Shore Stephen H. & Wagner Martin, 2005. "The Environmental Kuznets Curve: Exploring a Fresh Specification," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 4(1), pages 1-30, June.
    22. N. Lesca, 2011. "Introduction," Post-Print halshs-00640604, HAL.
    23. 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.
    24. 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.
    25. Bhattarai, Madhusudan & Hammig, Michael, 2004. "Governance, economic policy, and the environmental Kuznets curve for natural tropical forests," Environment and Development Economics, Cambridge University Press, vol. 9(03), pages 367-382, July.
    26. Dinda, Soumyananda, 2004. "Environmental Kuznets Curve Hypothesis: A Survey," Ecological Economics, Elsevier, vol. 49(4), pages 431-455, August.
    27. 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.
    28. Magnani, Elisabetta, 2000. "The Environmental Kuznets Curve, environmental protection policy and income distribution," Ecological Economics, Elsevier, vol. 32(3), pages 431-443, March.
    29. Ekins, Paul, 1999. "European environmental taxes and charges: recent experience, issues and trends," Ecological Economics, Elsevier, vol. 31(1), pages 39-62, October.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Environmental taxation; Environmental Kuznets Curve; Rule of law;

    JEL classification:

    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • P28 - Economic Systems - - Socialist Systems and Transition Economies - - - Natural Resources; Environment
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:39433. 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: (Joachim Winter) or (Rebekah McClure). General contact details of provider: http://edirc.repec.org/data/vfmunde.html .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.