Decentralization and Environmental Quality: An International Analysis of Water Pollution

Seminar arranged by LEFIC.

Seminar on the political economy of pollution control with Professor Hilary Sigman, Rutgers University

Abstract

Many arguments about the best level of government for environmental policy-making have testable implications about the relationship between decentralization and environmental quality. For example, decentralization would raise pollution if destructive regulatory competition occurs, whereas it would reduce pollution under some models of decision-making by a centralized legislature. T

his paper explores the relationship between decentralization and environmental quality, using a panel data set on water pollution at river monitoring stations around the world. It examines pollution levels and spatial variability of pollution within a country for both a local and a regional pollutant. The results suggest higher pollution levels with greater decentralization; the evidence is strongest for the regional pollutant, where it might result from interjurisdictional free riding. Spatial heterogeneity in pollution is associated with federalism, consistent with the traditional view that decentralization allows policies more tailored to local conditions.