Advanced

Environmental pollution and fiscal decentralization. On the role of institutions.

Romero Molina, Alfred LU (2018) NEKP01 20181
Department of Economics
Abstract
Previous research in the field of Environmental Federalism has not reached an agreement on whether fiscal decentralization leads to an increase in environmental pollution, i.e. a race to the bottom, or decrease in it, i.e. a a race to the top. Farzanegan and Mennel (2012) point out that this discrepancy may be due to institutions. Employing the OLS estimator, they find that fiscal decentralization leads to a race to the bottom which is mitigated by the quality of institutions in both transboundary and local pollutants. In this paper, the GMM estimator is employed to account for endogeneity issues arising from fiscal decentralization and the quality of institutions. Contrarily to what it was previously found, it is shown in this empirical... (More)
Previous research in the field of Environmental Federalism has not reached an agreement on whether fiscal decentralization leads to an increase in environmental pollution, i.e. a race to the bottom, or decrease in it, i.e. a a race to the top. Farzanegan and Mennel (2012) point out that this discrepancy may be due to institutions. Employing the OLS estimator, they find that fiscal decentralization leads to a race to the bottom which is mitigated by the quality of institutions in both transboundary and local pollutants. In this paper, the GMM estimator is employed to account for endogeneity issues arising from fiscal decentralization and the quality of institutions. Contrarily to what it was previously found, it is shown in this empirical investigation that (1) the effect that fiscal decentralization exerts on pollution depends on the quality of institutions; and (2) fiscal decentralization leads to decreased environmental degradation when countries display high-quality institutions, and thus we find a race-to-the-top, whereas for low-quality institutions the opposite is true. These results hold for transboundary pollutants, but not for local pollutants. (Less)
Please use this url to cite or link to this publication:
author
Romero Molina, Alfred LU
supervisor
organization
course
NEKP01 20181
year
type
H2 - Master's Degree (Two Years)
subject
keywords
Environmental pollution, fiscal decentralization, institutions, race to the top, race to the bottom, GMM estimator.
language
English
id
8945500
date added to LUP
2018-07-03 13:36:32
date last changed
2018-07-03 13:36:32
@misc{8945500,
  abstract     = {Previous research in the field of Environmental Federalism has not reached an agreement on whether fiscal decentralization leads to an increase in environmental pollution, i.e. a race to the bottom, or decrease in it, i.e. a a race to the top. Farzanegan and Mennel (2012) point out that this discrepancy may be due to institutions. Employing the OLS estimator, they find that fiscal decentralization leads to a race to the bottom which is mitigated by the quality of institutions in both transboundary and local pollutants. In this paper, the GMM estimator is employed to account for endogeneity issues arising from fiscal decentralization and the quality of institutions. Contrarily to what it was previously found, it is shown in this empirical investigation that (1) the effect that fiscal decentralization exerts on pollution depends on the quality of institutions; and (2) fiscal decentralization leads to decreased environmental degradation when countries display high-quality institutions, and thus we find a race-to-the-top, whereas for low-quality institutions the opposite is true. These results hold for transboundary pollutants, but not for local pollutants.},
  author       = {Romero Molina, Alfred},
  keyword      = {Environmental pollution,fiscal decentralization,institutions,race to the top,race to the bottom,GMM estimator.},
  language     = {eng},
  note         = {Student Paper},
  title        = {Environmental pollution and fiscal decentralization. On the role of institutions.},
  year         = {2018},
}