Castiglione, Concetta and Infante, Davide and Smirnova, Janna (2012): Rule of law and its implications for the environmental taxation-income path across European Countries.
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Recent research has clearly demonstrated that economic development is closely related to environmental quality. In last two decades this relationship has been described by the Environmental Kuznets Curves that postulates an inverted U-shaped relationship between pollution and income. However, while theoretical and empirical research has focused on the polluting effects of economic development, few have identified the policy instruments which can be introduced to counteract such negative effects. This paper concentrates on one of these instruments and examines how environmental taxation is related to economic development. The introduction of environmental taxes usually requires strong regulation capabilities such as effective monitoring and enforcement. We assume that these capabilities reflect the integrity of the institution of rule of law and examine how the strength of rule of law affects the environmental taxation-income path. Data from 28 European countries analysed confirm the existence of an inverse U-shaped relationship between environmental taxation and per capita income. The empirical results clearly demonstrate that the environmental taxation-income relationship is strongly influenced by the rule of law which, when strong, ensures that environmental policies are implemented effectively. A strong rule of law thus contributes to achieving a turning point at lower levels of per capita income. Our analysis also made it possible to identify differences in environmental taxation-income paths among European countries, showing that post-transition economies may have not yet reached the turning point of the curve due to the presence of a weaker rule of law.
|Item Type:||MPRA Paper|
|Original Title:||Rule of law and its implications for the environmental taxation-income path across European Countries|
|Keywords:||Environmental taxation; Environmental Kuznets Curve; Rule of law|
|Subjects:||O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O43 - Institutions and Growth
P - Economic Systems > P2 - Socialist Systems and Transitional Economies > P28 - Natural Resources ; Energy ; Environment
H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H23 - Externalities ; Redistributive Effects ; Environmental Taxes and Subsidies
Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q58 - Government Policy
|Depositing User:||Prof. Davide Infante|
|Date Deposited:||14. Jun 2012 15:22|
|Last Modified:||11. Feb 2013 19:01|
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