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Electoral incentives and firm behavior: Evidence from U.S. power plant pollution abatement

Author

Listed:
  • Matthew Doyle

    (Colorado School of Mines)

  • Corrado Di Maria

    (University of East Anglia)

  • Ian Lange

    (Colorado School of Mines)

  • Emiliya Lazarova

    (University of East Anglia)

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 enforce- ment. 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 Lange & Emiliya Lazarova, 2016. "Electoral incentives and firm behavior: Evidence from U.S. power plant pollution abatement," University of East Anglia School of Economics Working Paper Series 2016-11, School of Economics, University of East Anglia, Norwich, UK..
  • Handle: RePEc:uea:ueaeco:2016_11
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    References listed on IDEAS

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    1. Timothy Besley & Anne Case, 1995. "Does Electoral Accountability Affect Economic Policy Choices? Evidence from Gubernatorial Term Limits," The Quarterly Journal of Economics, Oxford University Press, vol. 110(3), pages 769-798.
    2. John A. List & Daniel M. Sturm, 2006. "How Elections Matter: Theory and Evidence from Environmental Policy," The Quarterly Journal of Economics, Oxford University Press, vol. 121(4), pages 1249-1281.
    3. Fredriksson, Per G. & Wang, Le & Mamun, Khawaja A., 2011. "Are politicians office or policy motivated? The case of U.S. governors' environmental policies," Journal of Environmental Economics and Management, Elsevier, vol. 62(2), pages 241-253, September.
    4. Hanna Rema Nadeem & Oliva Paulina, 2010. "The Impact of Inspections on Plant-Level Air Emissions," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-33, March.
    5. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-In-Differences Estimates?," The Quarterly Journal of Economics, Oxford University Press, vol. 119(1), pages 249-275.
    6. Lee, David S., 2008. "Randomized experiments from non-random selection in U.S. House elections," Journal of Econometrics, Elsevier, vol. 142(2), pages 675-697, February.
    7. Leigh, Andrew, 2008. "Estimating the impact of gubernatorial partisanship on policy settings and economic outcomes: A regression discontinuity approach," European Journal of Political Economy, Elsevier, vol. 24(1), pages 256-268, March.
    8. Beland, Louis-Philippe & Boucher, Vincent, 2015. "Polluting politics," Economics Letters, Elsevier, vol. 137(C), pages 176-181.
    9. Laura E. Grant & Katherine K. Grooms, 2017. "Do Nonprofits Encourage Environmental Compliance?," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 4(S1), pages 261-288.
    10. Louis-Philippe Beland Jr., 2015. "Political Parties and Labor-Market Outcomes: Evidence from US States," American Economic Journal: Applied Economics, American Economic Association, vol. 7(4), pages 198-220, October.
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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," Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168267, Verein für Socialpolitik / German Economic Association.

    More about this item

    Keywords

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

    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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