Essays on political economy of environmental policy: Technology choice, political instability and democracy

This dissertation consists of three essays that examine the effects of various governmental attributes on environmental policy and technology.; The first essay seeks to explain the implications of corruption and political instability on the firm's abatement technology investment. We employ a model where a monopoly firm has an incentive to under-invest in abatement technology in order to gain an advantage in the political process determining environmental policy. We investigate whether greater corruptibility can lead to an increase the level of abatement technology investment. In addition, we examine whether political instability can raise abatement technology investment. Using steel-sector panel data from 49 countries for the years 1992--1998, we try to find empirical evidence for the effect of corruption and political instability on technology choice.; The second essay seeks to explain the implications of democracy and political instability on the level of environmental policy stringency. The interaction between the two variables plays a vital role that has been ignored in the literature. We find that greater policymaker instability leads to a decrease in environmental policy, where the level of democracy is sufficiently high. However, political instability increases environmental policy, where the level of democracy is relatively low. Using cross-country data for the late 1990's, we find empirical support for these predictions. We determine that stable democracies set relatively more stringent environmental polices. This is a novel finding in the literature.; The third essay takes a deeper look at the positive effect of democracy on environmental policy stringency. Using the method of propensity score matching, we show that this result is largely driven by parliamentary democracies, as opposed to presidential-congressional systems. Presidential-congressional systems do appear to have higher gasoline taxes than dictatorships, but other environmental policy measures are largely equivalent to those set by dictatorships. Electoral rules (proportional and majoritarian systems) make little difference, on the other hand. This is a novel finding in the literature.