Clean or dirty energy: evidence of corruption in the renewable energy sector

Caterina Gennaioli and Massimo Tavoni

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: This paper studies the link between public policy and corruption for the case of wind energy. We show that publicly subsidized renewable energy can attract criminal appetites and favor the formation of criminal associations between entrepreneurs and politicians able to influence the licensing process. The insights of a simple model of political influence by interest groups are tested empirically using Italian data for the period 1990-2007. Using a difference in difference approach we quantify the impact of a Green Certificate policy aimed at supporting renewables, and find robust evidence that criminal association activity increased more in windy provinces after the introduction of the generous policy regime. The magnitude of the effect is large: the construction of an average wind park is associated with an increase of criminal association activity of 6% in the treatment compared to the control group. Our findings show that in the presence of poor institutions, even well designed market-based policies can have an adverse impact. The analysis is relevant for countries which are generally characterized by heavy bureacracies, weak institutions and by large renewable potential.

Keywords: corruption; government subsidies; natural resources; renewable energy. (search for similar items in EconPapers)
JEL-codes: D73 H23 O13 (search for similar items in EconPapers)
Date: 2016-03-16
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (31)

Published in Public Choice, 16, March, 2016, 166(3), pp. 1-30. ISSN: 0048-5829

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