Environmental performance and quality of governance: A non-parametric analysis of the NUTS 1-regions in France, Germany and the UK

Halkos, George and Sundström, Aksel and Tzeremes, Nickolaos (2013): Environmental performance and quality of governance: A non-parametric analysis of the NUTS 1-regions in France, Germany and the UK.

Abstract

This paper applies nonparametric estimators to examine the effect of regional quality of government on the environmental performance in the NUTS 1-regions in France, Germany and the UK. The most comprehensive existing regional measure on governance is used, gauging the partiality, corruption and effectiveness of government services in each region. By utilizing regional level measures of three pollutants (CO2, CH4 and N2O) the effect of governance on environmental efficiency is analyzed. The empirical analysis suggests that there is a nonlinear relationship between regions’ governance quality levels and their environmental performance. It appears that the effect of regional quality of governance is positive up to a certain level, then turning slightly negative. This suggests that higher governance quality will not always result in increased environmental efficiency.

• Item Type: MPRA Paper
• Language: English
• Keywords: Quality of governance; Environmental performance; Regions; Nonparametric analysis.
• Subjects: C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C14 - Semiparametric and Nonparametric Methods: General; 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 > Q50 - General; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q58 - Government Policy; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R1 - General Regional Economics > R11 - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

References

Agnew J. David, John Pearce, Ganapathiraju Pramod, Tom Peatman, Reg Watson, John R. Beddington, Tony J. Pitcher. 2009. Estimating the worldwide extent of illegal fishing. PloS ONE, 4 (2): 1-8.

Bădin L, Daraio, C., Simar, L., 2010. Optimal bandwidth selection for conditional efficiency measures: a data-driven approach. European Journal of Operational Research 201, 633–640.

Barrett, C. B., C. C. Gibson, B. Hoffman, and M. D. McCubbins. 2006. The complex links between governance and biodiversity. Conservation biology 20 (5): 1358-1366.

Bernauer, T. and V. Koubi. 2012. Are bigger governments better providers of public goods? Evidence from air pollution Public Choice DOI 10.1007/s11127-012-9916-1.

Cazals, C., Florens, J.P., Simar, L. 2002. Nonparametric frontier estimation: a robust approach. Journal of Econometrics 106: 1–25.

Chambers, R.G., Chung, Y., Färe, R., 1998. Profit, directional distance functions, and Nerlovian efficiency. Journal of Optimization Theory and Applications 98, 351–364.

Charron, N. 2010. Assessing The Quality of the Quality of Government Data: A Sensitivity Test of the World Bank Government Indicators. Avaialable online [http://www.qog.pol.gu.se/data/datadownloads/qogeuregionaldata/]

Charron, N. and V. Lapuente. 2013. Why do Some Regions in Europe have Higher Quality of Government?” Journal of Politics X:X.

Charron, N. L. Dijkstra and V. Lapuente. 2013. Regional Governance Matters: Quality of Government within European Union Member State. Regional Studies, http://dx.doi.org/10.1080/00343404.2013.770141.

Charron, N., V. Lapuente and B. Rothstein. 2011. Measuring Quality of Government and Sub-national Variation. Report for the EU Commission of Regional Development. European Commission Directorate-General Regional Policy Directorate Policy Development.

Chung, Y.H., Färe, R., Grosskopf, S., 1997. Productivity and undesirable outputs: a directional distance function approach. Journal of Environmental Management 51, 229–240.

Cole, Matthew A. 2007. Corruption, Income and the Environment: An Empirical Analysis. Ecological Economics 62 (3-4): 637-647.

Crepaz, M., 1995. Explaining national variations of air pollution levels: political institutions and their impact on environmental policy-making. Environmental Politics 4: 391-414.

Damania, Richard.
2002. Environmental controls with corrupt bureaucrats, Environment and Development Economics, 7 (3): 407-427. Damania, Richard, Per G. Fredriksson and John A. List. 2003. Trade liberalization, corruption, and environmental policy formation: theory and evidence. Journal of Environmental Economics and Management 46 (3): 490–512.

Damania, Richard, Per G. Fredriksson, and Muthukumara Mani. 2004. The Persistence of Corruption and Regulatory Compliance Failures: Theory and Evidence. Public Choice 12: 363-390.

Daraio, C. and Simar, L. 2005. Introducing environmental variables in nonparametric frontier models: a probabilistic approach. Journal of Productivity Analysis 24, 93–121.

Daraio, C. and Simar, L. 2006. A robust nonparametric approach to evaluate and explain the performance of mutual funds. European Journal of Operational Research 175, 516–542.

Daraio, C. and Simar, L. 2007. Conditional nonparametric frontier models for convex and nonconvex technologies: a unifying approach. Journal of Productivity Analysis 28, 13–32.

Desai, U. 1998. Ecological Policy and Politics in Developing Countries: Economic Growth, Democracy and Environment, Albany, New York: State University of New York Press.

Epstein, L. and M. Denny 1980. Endogenous capital utilization in a short run production model, Journal of Econometrics 12:189 – 207.

Esty, Daniel, Marc Levy, Tanja Srebotnjak, and Alexander de Sherbinin. 2005. Environmental Sustainability Index. New Haven: Yale Center for Environmental Law and Policy.

Ewers, Robert M. and Robert J. Smith. 2007. Choice of Index Determines the Relationship Between Corruption and Environmental Sustainability. Ecology and Society 12 (1): 1-20.

Feldstein, M. and D. Foot (1971), ‘The Other Half of Gross Investment: Replacement and Modernization’, Review of Economics and Statistics 53:49 – 58.

Ferraro, P. 2005. Corruption and conservation: the need for empirical analyses. A response to Smith and Walpole. Oryx, 39, 257–259.

Fredriksson, P. G., E. Neumayer and G. Ujhelhyi. 2007. Kyoto Protocol cooperation: Does government corruption facilitate environmental lobbying? Public Choice 133:231-251.

Fredriksson , P. G. and J. R. Wollscheid. 2007. Democratic institutions versus autocratic regimes: The case of environmental policy Public Choice 130:381-393.

Fredriksson, P. G. and J. Svensson. 2003. Political Instability, Corruption and Policy Formation: the Case of Environmental Policy. Journal of Public Economics 87 (8): 1383-1405.

Fredriksson, P.G., J. A. List, and D. L. Millimet. 2003 Bureaucratic corruption, environmental policy and inbound US FDI: theory and evidence. Journal of Public Economics 87: 1407–1430.

Fredriksson, P. G., H. R. J. Vollenberg, and E. Dijkgraaf. 2004. Corruption and energy efficiency in OECD countries: theory and evidence. Journal of Environmental Economics and Management 47 (2): 207–231.

Färe, R., Grosskopf, S., Lovell, C.A.K., Pasurka, C., 1989. Multilateral productivity comparisons when some outputs are undesirable. Review of Economics and Statistics 71, 90–98.

Färe, R., Grosskopf, S., Tyteca, D., 1996. An activity analysis model of the environment performance of firms: application to fossil-fuel-fired electric utilities. Ecological Economics 18, 161–175.

Färe, R., Grosskopf, S., Hernandez-Sancho, F., 2004. Environmental performance: an index number approach. Resource & Energy Economics 26, 343–352.

Färe, R., and Grosskopf, S., 2009. A comment on weak disposability in nonparametric production analysis. American Journal of Agricultural Economics 91, 535–538.

Färe, R. and Grosskopf S. 2004 Modeling undesirable factors in efficiency evaluation: comment. European Journal of Operational Research 157, 242–245.

Färe, R., and Primont, D. 1995. Multi-Output Production and Duality: Theory and Applications. Kluwer Academic Publishers, Boston.

Golden, Miriam A. and Min, Brian K. 2013. Corruption and Theft of Electricity in an Indian State. Forthcoming in the World Bank Economic Review.

Hafner, Othmar. 1998. The role of corruption in the misappropriation of tropical forest resources and in tropical forest destruction. Transparency International Working Paper, Available online [http://resources.transparency.bg/download.html?id=235]

Hahn, R. W. 1990. The political economy of environmental regulation: Towards a unifying framework Public Choice 65:21-47.

Halkos, G., Tzeremes, N., 2013a. A conditional directional distance function approach for measuring regional environmental efficiency: Evidence from UK regions, European Journal of Operational Research, 227, 182-189.

Halkos, G., Tzeremes, N., 2013b. Carbon dioxide emissions and governance: A nonparametric analysis for the G-20, Energy Economics, 40, 110-118.

Halkos, George & Tzeremes, Nickolaos, 2013c. Economic growth and environmental efficiency: Evidence from U.S. regions. Economics Letters, 120(1), 48-52.

Halkos, G., Tzeremes, N. 2013d. " Measuring the effect of Kyoto protocol agreement on countries’ environmental efficiency in CO2 emissions: an application of conditional full frontiers," Journal of Productivity Analysis, doi: 10.1007/s11123-013-0343-1.

Halkos, G., Tzeremes, N. 2009. Exploring the existence of Kuznets curve in countries' environmental efficiency using DEA window analysis, Ecological Economics 68(7): 2168–2176.

Hall, P., Racine, J.S., Li, Q. 2004. Cross-validation and the estimation of conditional probability densities. Journal of the American Statistical Association 99, 1015–1026.

Jeong, S.O., Park, B.U., Simar, L. 2010. Nonparametric conditional efficiency measures: asymptotic properties. Annals of Operations Research 173, 105–122.

Katzner, T. 2005. Corruption – a double-edged sword for conservation? A response to Smith & Walpole. Oryx 39: 260–262.

Knill, C. and Lenschow, A. 1998. Coping with Europe: the impact of British and German administrations on the implementation of EU environmental policy. Journal of European Public Policy 5,595-614.

Koyuncu, Cuneyt, and Rasim Yilmaz. 2009. The Impact of Corruption on Deforestation: Cross-country Evidence. The Journal of Developing Areas 42 (2): 213-222.

Kuosmanen, T. 2003. Duality theory of non-convex technologies. Journal of Productivity Analysis,20:273–304.

Kuosmanen, T., 2005. Weak disposability in nonparametric production analysis with undesirable outputs. American Journal of Agricultural Economics 87, 1077–1082.

Kuosmanen, T., Podinovski, V., 2009. Weak disposability in nonparametric production analysis: reply to Fare and Grosskopf. American Journal of Agricultural Economics 91, 539–545.

Leader-Williams, Nigel, Roland D. Baldus, and Robert J. Smith. 2009. The Influence of Corruption on the Conduct of Recreational Hunting. In Recreational Hunting, Conservation and Rural livelihoods: Science and Practice, edited by Barney Dickson, Jon Hutton, and William M. Adams. Hoboken, New Jersey: Wiley-Blackwell.

Li, Q. and R. Reuveny. 2006. Democracy and Environmental Degradation. International Studies Quarterly 50:935-956.

Li, Q. and Racine, J.S., 2007. Nonparametric Econometrics: Theory and Practice. Princeton University Press, New Jersey.

Lippe, Michael. 1999. Corruption and environment at the local level. Transparency International Working Paper. Available online [http://resources.transparency.bg/download.html?id=226].

Lopez, Ramón and Siddharta Mitra. 2000. Corruption, Pollution, and the Kuznets Environment Curve. Journal of Environmental Economics and Management 40 (2): 137-150.

Meiners, R. E. and B. Yandle. 1998. Common law environmentalism Public Choice 94:49-66.

Meyer, A.L., G. C. van Kooten, and S. Wang. 2003 Institutional, social and economic roots of deforestation: a cross-country comparison, International Forestry Review 5 (1): 29-37

Miller, Michael. 2011. Persistent Illegal Logging in Costa Rica: The Role of Corruption Among Forestry Regulators. The Journal of Environment & Development 20 (2): 50-68.

Morse, Stephen. 2006. Is Corruption Bad for Environmental Sustainability? A Cross-national Analysis. Ecology and Society 11 (1): 1-22.

Nadaraya, E.A., 1964. On estimating regression. Theory of Probability and its Applications 9, 141–142.

Nadiri, I. and I. Prucha. 1996. Estimation of the depreciation rate of physical and R&D capital in the U.S. total manufacturing sector, Economic Inquiry 34: 43 – 56.

Neumayer, Eric. 2003. “Are Left-wing Party Strength and Corporatism Good for the Environment? Evidence from Panel Analysis of Air Pollution in OECD Countries,” Ecological Economics 45: 203-220.

Pellegrini, Lorenzo. 2011. Corruption, Development and the Environment. Springer: Dordrecht.

Pellegrini, Lorenzo, and Reyer Gerlagh. 2006. Corruption, Democracy, and Environmental Policy: An empirical Contribution to the Debate. Journal of Environment and Development 15 (3): 332-354

Picazo-Tadeo, A., Beltra-Esteve, M., Gomez-Limon, J.A., 2012. Assessing ecoefficiency with directional distance functions. European Journal of Operational Research 220, 798–809.

Podinovski, V.V., Kuosmanen, T., 2011. Modelling weak disposability in data envelopment analysis under relaxed convexity assumptions. European Journal of Operational Research 3, 577–585.

Racine, J. S. 1997. Consistent significance testing for nonparametric regression. Journal of Business and Economic Statistics 15, 369–378.

Racine, J. S., Hart J., Li, Q. 2006. Testing the significance of categorical predictor variables in nonparametric regression models. Econometric Reviews 25, 523–544.

Racine, J. S., 2008. Nonparametric econometrics: a primer. Foundations and Trends in Econometrics 3, 1–88.

Robbins, Paul. 2000. The Rotten Institution: Corruption in Natural Resource Management. Political Geography 19: 423-443.

Sahoo, B.K. and Tone, K. 2013. Non-parametric measurement of economies of scale and scope in non-competitive environment with price uncertainty, Omega 41, 97-111.

Sapru, R. K. 1998. Public Policy: Formulation, Implementation and Evaluation. New Delhi: Sterling Publishers.

Scarf, H. E. 1981a. Production sets with indivisibilities part I: generalities. Econometrica 1981;49:1–32.

Scarf, H.E. 1986. Neighborhood systems for production sets with indivisibilities. Econometrica 54:507–32.

Silverman, B. W. 1986. Density estimation for Statistics and Data Analysis. Monographs on Statistics and Applied Probabilities No 26. Chapman and Hall/CRC.

Simar, L. and Vanhems A. 2012 Probabilistic characterization of directional distances and their robust versions, Journal of Econometrics 166, 342–354.

Shephard R.W. 1970 Theory of Cost and Production Functions, Princeton University Press, Princeton, NJ.

Smith, Joytee, Ketty Obidzinski, Subarudi M. Wood, and Samsu I. Suramenggala. 2003. Illegal Logging, Collusive Corruption and Fragmented Governments in Kalimantan, Indonesia. International Forestry Review 5: 293–302.

Smith, Robert J., and M. J. Walpole. 2005. Should Conservationists Pay More Attention to Corruption? Oryx 39: 251-256.

Smith, R.J., Muir, R.D.J., Walpole, M.J., Balmford, A. & Leader-Williams, N. 2003. Governance and the loss of biodiversity. Nature 426: 67–70.

Scruggs, L., 1999. Institutions and Environmental Performance in Seventeen Western Democracies. British Journal of Political Science 29: 1-31.

Sundström, A. 2013. Corruption in the commons: Why bribery hampers enforcement of environmental regulations in South African fisheries. International Journal of the Commons (Forthcoming).

Terregrossa, R. 1997. Capital Depreciation and Investment Demand, The Quarterly Review of Economics and Finance 37:79 – 95.

Tone K. and Sahoo B.K. 2003. Scale, indivisibilities and production function in data envelopment analysis. International Journal of Production Economics, 84:165–92.

Treisman, D. 2007. What have we learned about the causes of corruption from ten years of cross-national empirical research? Annual Review of Political Science, 10, 211–244.

Walpole, M. J., and Smith, Robert. J. 2005. Focusing on Corruption: a Reply to Ferraro and Katzner. Oryx 39: 263-264.

Watson, G.S., 1964. Smooth regression analysis. Sankhya Series A 26, 359-372.

Welsch, Heinz. 2004. Corruption, Growth, and the Environment: a Cross-country Analysis. Environment and Development Economics 9: 663-693.

Verstraete, J. 1976. An estimate of the capital stock for the Belgian industrial sector, European Economic Review 8: 33 – 49.

Wright, S. Joseph, Arturo Sanchez-Azofeifa, Carlos Portillo-Quintero, and Diane Davies. 2007. Poverty and Corruption Compromise Tropical Forest Reserves. Ecological Applications 17: 1259–1266.

Zelenyuk, V., Zheka, V., 2006. Corporate governance and firm’s efficiency: the case of a transitional country, Ukraine. Journal of Productivity Analysis 25, 143–157.

Österblom, Henrik, Rashid U. Sumaila, Örjan Bodin, Jonas Hentati-Sundberg. 2010. Adapting to regional enforcement: fishing down the governance index. PLoS ONE 5 (9): 1–8.