Assessing the impact of formal and informal regulations on environmental and economic performance of Brazilian manufacturing firms

Arnaud Reynaud

No 27, Working Papers from Development and Policies Research Center (DEPOCEN), Vietnam

Abstract: This study investigates the impact of formal and informal regulations on environmental and economic performance of Brazilian manufacturing firms. We adopt a dual approach where production technology is represented by a cost function, approximated by a translog form. Pollution is considered as a negative by-product that can be modified trough using either formal regulation (inspections or sanctions) or informal regulation (community pressure). A simultaneous equation model is estimated by three-state least squares on a sample of 404 industrial establishments located in the state of Sao Paulo, Brazil. We show that pollution abatement costs for the Brazilian manufacturing sector are different from zero which suggests that pollution emissions are affected by environmental regulation. We also demonstrate that environmental performance of firms is jointly affected by formal and informal regulation. Lastly, formal regulation is largely influenced by informal regulation and more specifically by community pressure.

Keywords: Environmental Regulation; Informal Regulation; Firms; Costs; Brazil. (search for similar items in EconPapers)
JEL-codes: L5 Q21 Q25 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2012
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Citations: View citations in EconPapers (43)

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Related works:
Journal Article: Assessing the Impact of Formal and Informal Regulations on Environmental and Economic Performance of Brazilian Manufacturing Firms (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:dpc:wpaper:2712

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