Corruption, environmental regulation and market entry

Amit K. Biswas and Marcel Thum

Environment and Development Economics, 2017, vol. 22, issue 1, 66-83

Abstract: The authors develop a simple analytical framework to study the welfare-maximizing environmental standards when market entry is endogenous and firms can circumvent regulation by bribing corrupt officials. Corruption changes the tradeoff in environmental policy. Corruption leads more polluting firms to enter into the market, which requires tighter environmental regulation. However, corruption also makes trading in some environmental protection for a marginally higher market entry optimal for the government.

Date: 2017
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