Politically Connected Firms and the Environment

Yu Haowei () and Lin Zhang
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Yu Haowei: College of Economics, Jinan University, Guangzhou, Guangdong 510632, China

The B.E. Journal of Theoretical Economics, 2022, vol. 22, issue 2, 579-602

Abstract: This paper examines the environmental effect of political connections at the individual and organizational levels. We integrate political connections at both levels in a four-stage game-theoretic framework to study the political interplay between an entrepreneur, a bureaucrat and a government. We distinguish individual-level political connections from bribery and argue that while the latter is generally more efficient for the firm aiming to reduce environmental tax payments, political connections become more appealing when the bureaucrat places a higher value on indirect non-monetary benefits. We find that individual-level political connections are associated with more emission discharges by the firm, while the effect of organizational-level political connections on emissions depends on a negative interaction effect between political connections at different levels and a positive resource-reallocation effect between abatement activities and production.

Keywords: political connections; emissions; bribery (search for similar items in EconPapers)
JEL-codes: C70 D72 Q53 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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DOI: 10.1515/bejte-2020-0167

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