Bribery, hierarchical government, and incomplete environmental enforcement

Abstract

A two-player model is established in order to examine the effects of environmental policy instruments, budget control, and bribery on decision making of local government and the firms. With or without bribery, the central government can always promote the abatement input by stipulating a higher marginal budget reward for the local government. Bribery can cause policy failure for some environmental instruments such as fines and local fine shares. In a clean society, a higher local fine share or higher fines will unambiguously increase pollution abatement. In a corrupt society, a higher local fine share or higher fines may reduce pollution abatement. With or without bribery, a stricter emission standard has an ambiguous effect on pollution abatement.

Gresham’s law in environmental protection

“…This implies the new Nash equilibrium has a higher total pollution amount. Proposition 2 can be compared with the findings of Viscusi and Zeckhauser (1979), Jones (1989), Kambhu (1989), Shaffer (1990), and Hu et al (2004). A common conclusion of Viscusi and Zeckhauser (1979) and Jones (1989) is that an increase in the lump-sum fines will not worsen the environmental quality.…”

“…Therefore, the effects of the same environmental policy in an oligopoly market structure can be very different from that in a perfect competition market structure. Kambhu (1989), Shaffer (1990), and Hu et al (2004) endogenize the detection probability of a violation. If firms can take some evasive actions such as bribery and litigation to influence the verdict probability, then an increase in fines will promote the evasive actions and hence may result in lower pollution abatement efforts.…”

“…The literature studying incomplete enforcement environmental policy includes Harford (1978Harford ( , 1991, Viscusi and Zeckhauser (1979), Harrington (1988), Jones (1989), Kambhu (1989), Shaffer (1990), Xepapadeas (1991), Malik (1990Malik ( , 1993, Keeler (1991), Segerson and Tietenberg (1992), Chua et al (1992), Swierzbsinski (1994), Garvie and Keeler (1994), Huang (1996), Lear and Maxwell (1998), Cohen (2000), 2 Heyes (2000), Polinsky and Shavell (2000), and Hu et al (2004). Harford (1978), Viscusi and Zeckhauser (1979), and Jones (1989) assume a perfect competition market structure and discuss the effects of environmental standards and penalties on environmental quality.…”

Quantifying slum electrification in India and explaining local variation

“…Instead of being used to design and enforce good regulations, resources are diverted to the personal profit for bureaucrats. There have then little incentives to remedy these problems (Hu, Huang, and Chu, 2004). The effect of corruption may be particularly large on the reliability of the electricity grid.…”

Who blames corruption for the poor enforcement of environmental laws? Survey evidence from Brazil

“…While the lack of bureaucratic resources matters for monitoring and oversight of industry groups, corruption is a key facet that prevents effective environmental policy (Fredriksson, Vollebergh, and Dijkgraaf, 2004;Cole, 2007). If corrupt officials accept bribes for looking the other way, individuals and organizations who pollute or destroy natural resources can avoid fines without changing their behavior (Hu, Huang, and Chu, 2004;Asproudis, 2011).…”