Relief for the Environment? The Importance of an Increasingly Unimportant Industrial Sector

Abstract

Deindustrialisation, stagnant real incomes of production workers and increasing inequality are latter-day features of many economies. It's common to assume that such developments pressure policy-makers to relax environmental standards. However, when heavily polluting industries become less important economically, their political importance also tends to diminish. Consequently, a regulator may increase the stringency of environmental policies. We find that declining industrial employment translates into stricter environmental standards. In contrast to previous studies, but consistent with our argument, we find that greater income inequality is associated with policies that promote a cleaner environment.

Long-run determinants of pollution: A robustness analysis

“…Pollution may decrease with inequality if inequality stems from ownership of clean capacity and the terms of trade do not react. A very similar result is reported byGassebner et al (2006a). They show theoretically and empirically that the declining economic significance of the industrial sector, associated with falling industrial incomes and a lower political weight, leads policy-makers to increase environmen-tal regulations.…”

The political economy of the Paris Agreement: Income inequality and climate policy

“…Beyond issues of inequality, it is worth noting that we find that the willingness to make an additional abatement effort with external support is lower when the importance of trade is higher, a finding that is consistent with existing evidence. In contrast, countries in which industrial activity is more important are more willing to make an additional effort, contrary to the hypothesis forwarded by Gassebner, Gaston and Lamla (2008).…”

“…AGRI i and IND i denote the respective shares of agriculture and industry in the GDP and account for the composition effect. Note that this specification allows us to check the hypothesis forwarded by Gassebner, Gaston and Lamla (2008) to the effect that the more important the industrial sector, the greater is the political pressure against environmentally friendly policies and the less the environmental damage mitigation. Furthermore, COAL i is the share of electricity produced by coal and it approximates the induced technique effect.…”

Behavioral determinants of proclaimed support for environment protection policies

“…Arguably, the most prominent economic factors relate to an economy's industrial structure, economic development, and openness. Declining industrial employment translates, for example, into lower pollution levels and stricter environmental standards (Neumayer 2003;Gassebner et al 2008), and income has a non-linear effect on some types of pollution as hypothesized by the Environmental Kuznets Curve (Grossman and Krueger 1995;Lamla 2009). The effect of global economic integration has remained somewhat ambiguous because at least three channels of influence are at work: changes in international trade patterns, the relocation of industries (as conjectured by the Pollution Haven Hypothesis), and the international transfer of technologies.…”