Per G. Fredriksson

Trade liberalization, corruption, and environmental policy formation: theory and evidence

This study explores the linkages between trade policy, corruption, and environmental policy. We begin by presenting a theoretical model that produces several testable predictions, including: (i) the effect of trade liberalization on the stringency of environmental policy depends on the level of corruption; and (ii) corruption reduces environmental policy stringency. Using panel data from a mix of developed and developing countries from 1982 to 1992, we find evidence that supports these conjectures. We view these results as representing an attempt at understanding the myriad of complex relationships that exist in an open economy.

Political instability, corruption and policy formation: the case of environmental policy

This paper develops a theory of environmental policy formation, taking into consideration the degree of corruptibility and political turbulence. The predictions that emerge are that the interaction between the two variables is important. Political instability has a negative effect on the stringency of environmental regulations if the level of corruption is low, but a positive effect when the degree of corruption is high. Corruption reduces the stringency of environmental regulations, but the effect disappears as political instability increases. The empirical findings are fully consistent with the predictions of the model.

Endogenous Pollution Havens: Does FDI Influence Environmental Regulations?

We suggest a novel perspective on the relationship between the stringency of environmental policies and foreign direct investment (FDI). We develop a political economy model with imperfect product market competition where local and foreign firms jointly lobby the local government for a favorable pollution tax. FDI is found to affect environmental policy, and the effect is conditional on the local governments degree of corruptibility. If the degree of corruptibility is sufficiently high (low), FDI leads to less (more) stringent environmental policy, and FDI thus contributes to (mitigates) the creation of a pollution haven. Our empirical results using panel data from 33 countries support the predictions of the model.

Ratification of the 1992 Climate Change Convention: What Determines Legislative Delay?

The authors use a proportional hazards framework toinvestigate the impact of various countrycharacteristics on the duration of time taken toratify the United Nations Framework Convention onClimate Change (FCCC). The most significant findingsare that the conditional probability of ratificationis positively related to total CO2 emissions andthe presence of civil liberties. The finding foremissions indicates that large, polluting countrieswere under great political pressure to ratify theFCCC. The latter finding is consistent with earlierresearch that found that democratic freedoms raisedthe probability of signing the Montreal Protocol.

The Political Economy of Trade Liberalization and Environmental Policy

A pressure group model where environmental and industry lobby groups offer political support in return for favorable pollution tax policies is used to explain and predict the equilibrium pollution tax in sectors protected by tariffs. The political economy effects of trade liberalization are investigated. The pollution tax is shown to decrease if the lobbying effort by the environmental lobby decreases more rapidly than by the industry lobby ceteris paribus. The level of political conflict falls with trade liberalization. Pollution may increase because of a reduction of the pollution tax, and tax revenues may fall simultaneously as pollution increases.

On the Formation of Industry Lobby Groups

This paper provides a step towards a more complete theory of lobbying, extending the menu-auction model of Grossman and Helpman [Grossman, G.M., Helpman, E., 1994. American Economic Review 84, 833-850] A new explanation is proposed for why more concentrated industries more easily overcome the free-rider problem inherent in political collective action. Instead of focusing on transactions costs as Olson [Olson, M., 1965. The Logic of Collective Action, Harvard University Press, Cambridge, MA], we show that more collusive industries with higher collusive profits have a greater incentive to form lobby groups and to contribute to industry lobbying. Moreover, more polluting industries also have a greater incentive to form and contribute to a lobby group.

Environmental policy choice: Pollution abatement subsidies

This paper first shows that subsidies to the input into pollution abatement are inefficient when a Pigouvian pollution tax is available. Using a model where the government receives political contributions from environmental and industry lobby groups, it then explains the use of pollution abatement subsidies in environmental policy as primarily being tools for redistribution. The pollution abatement subsidy and pollution tax are determined in political equilibrium. The equilibrium subsidy rate is shown to depend on the subsidy elasticities of pollution and abatement, and lobby group membership.

Is there a 'California Effect' in US Environmental Policymaking?

Abstract What determines state environmental policymaking in the US? Vogel (Trading Up: Consumer and Environmental Regulation in a Global Economy, Harvard University Press, Cambridge, MA, 1995; J. Eur. Pub. Pol. 4 (1997) 556–571) argues that California has been a de facto leader since the early 1970s in terms of automobile emissions standards. In this paper, we investigate the generality of California’s leadership role with respect to changes in overall pollution abatement expenditures. We present a simple model of yardstick competition in abatement costs. Using state-level panel data from 1977 to 1994 on abatement costs, our results indicate at best a minor role for California. Other states, in particular California’s immediate neighbors, do not appear to use California as a guideline.

Collective Action and Protection

Empirically collusive industries are known to be highly effective lobbyists. The reasons for this unclear and poorly understood. This paper provides a new explanation for the formation of protectionistic lobby groups. The level of collusion is shown to be a crucial determinant of the ability of firms to sustain lobbying. It is demonstrated that a critical determinant of the degree of protection obtained depends upon the cross price elasticity of demand between the domestic good and the foreign import. We thus provide an explanation for the mixed empirical evidence on the effect of industry concentration on protection. Finally, the equilibrium tariff rate in imperfectly competitive sectors is determined, which yields new insights into the determination of tariffs.

The Siting of Hazardous Waste Facilities in Federal Systems: The Political Economy of NIMBY

This paper offers a new political economy explanation for thepervasive problem of siting hazardous waste treatment facilitiesin federal system. We first show that a decentralized systemyields the first-best waste treatment capacity level and that acentralized structure gives rise to free-riding behavior amonglocal jurisdictions. In our model, each community seeks toinfluence the central government through political contributions.This leads to suboptimal levels of treatment capacity. Thecapacity is increasing in the compensation level if the marginalbenefit of treatment capacity is sufficiently large, and in thegovernments weight on aggregate social welfare relative tolobbying activities. The centralized system can replicate thedecentralized system with a sufficiently high compensation level.Since compensation has proved difficult, a centralized systemfaces greater obstacles than a decentralized system.