Fiscal decentralization and Pollution: Institutions Matter

Mohammad Reza Farzanegan () and Tim Mennel ()
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Tim Mennel: Center for European Economic Research (ZEW)

No 201222, MAGKS Papers on Economics from Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung)

Abstract: We estimate the impact of fiscal decentralization on different indicators of pollution for more than 80 countries from 1970 to 2000. Our cross country estimates show that fiscal decentralization increases pollution. However, higher quality of institutions can limit the destructive environmental effects of decentralization. The empirical results confirm a strand of the literature on decentralization that predicts a “race to the bottom” under federalism. The mitigating effect of good governance can be explained by relative preferences of local and central governments for environmental quality.

Keywords: decentralization; pollution; environmental quality; institutions (search for similar items in EconPapers)
JEL-codes: C21 H11 H72 Q53 Q56 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2012
New Economics Papers: this item is included in nep-env and nep-pbe
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Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:mar:magkse:201222

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