Friday, August 4, 2006

Corruption, Democracy, and Environmental Policy: An Empirical Contribution

So this is why we hear so much about governance!  An empirical study by Pellegrini and Gerlagh, published in the Journal of Environment and Development, suggests that higher environmental standards are more likely to follow increased rates of economic growth when there governance improvements as well (democratic institutions, lack of corruption).  It makes some sense -- otherwise the increasing wealth simply gets diverted into the pockets of government officials who don't care about environmental standards.<>

  Link: Corruption, Democracy, and Environmental Policy


Theoretical and empirical studies have shown that democracy and corruption influence environmental policies. In this article, the authors empirically analyze the relative importance of these determinants of environmental policy. When these variables are jointly included as explanatory variables in a multiple regression analysis, the authors found that corruption stands out as a substantial and significant determinant of environmental policies, while proxies for democracy have an insignificant impact. Nevertheless, democracy could affect environmental policy stringency given that countries with a history of democratic rule tend to be less corrupted. The authors argue that improving environmental quality following increasing income is less probable in developing countries with institutional disarray. Finally, and more optimistically, when considering the results in the context of institutions and growth, the authors conclude that there is scope for reaping a double dividend, when institutional improvements and reductions in corruption induce higher economic growth rates and stricter environmental policies.

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