اقتصاد سیاسی سرمایه گذاری : مورد تکنولوژی کنترل آلودگی

This paper seeks to explain the implications of corruption and political instability for firm investment in abatement technology. In our theoretical set-up, a firm has an incentive to under-invest in abatement technology in order to gain a political advantage. The prediction that emerges is that greater corruptibility increases the level of abatement technology investment. This occurs because the strategic incentive to under-invest in pollution control technology declines when policymakers become more corruptible. Moreover, the model predicts that political instability raises abatement technology investment. Using steel-sector panel data from 41 countries for the years 1992–1998, we find empirical support for these predictions.

In 1998, steel producers in Colombia, Indonesia, and Venezuela primarily used environmentally friendly technology, while the predominant technology used by steel producers in The Netherlands was more pollution-intensive.1 Meanwhile, the Colombian, Indonesian, and Venezuelan governments are classified as highly corrupt, while the Dutch government is perceived as among the cleanest in the world (Kaufman et al., 1999).2 The observed pattern of abatement technology investment is particularly puzzling since a recent literature argues that lower corruption raises the stringency of environmental policy and quality (see, e.g., López and Mitra, 2000 and Fredriksson and Svensson, 2003). In this paper, we seek to explain the cross-country pattern of firm abatement technology investment choices by exploring the roles of corruption and political instability. This issue has previously not received attention in the literature.3,4 We utilize a model where a single firm invests in an irreversible pollution abatement technology. More advanced technologies are more expensive, but are associated with lower variable abatement costs per unit of pollution. The monopoly offers the government a bribe in exchange for more favorable pollution tax policy, in the spirit of the menu auction approach by Bernheim and Whinston (1986), applied (to trade policy) by Grossman and Helpman (1994).

The present paper identifies two new relationships between policymaker corruptibility, political instability, and investment in “clean” technology. The model predicts that greater corruptibility raises the level of investment in pollution control technology, and the effect is conditional on the degree of political instability. Second, the model shows that the effect of political instability on clean technology investment is conditional on the degree of corruptibility. In particular, the prediction that emerges is that whereas political instability raises the investment levels where governments are relatively honest, the effect is lower where corruptibility is high. Our empirical evidence supports these predictions. We believe these are novel contributions to the literature. Moreover, our results shed some light on the indirect effects of corruption reform programs supported by, e.g., the World Bank. Such programs may need to be combined with policies that stimulate investment in pollution abatement technologies. Acknowledgements We would like to thank two thorough, helpful and insightful referees, Richard Damania, Tom Fomby, Arye Hillman, Angeliki Kourelis, Thomas Osang, Laura Razzolini, Dipa Sarkar, Thomas Sterner, Jakob Svensson, and participants at the presentations at Southern Methodist University and at the Southern Economics Association meetings in New Orleans for helpful comments and suggestions. We are grateful to Muthukumara Mani and Jakob Svensson for providing some of the data. The usual disclaimers apply.