| This paper develops a theory of illegal trade in ozone-depleting substances under compliance with the Montreal Protocol, taking into account the level of corruption, law enforcement and environmental tariffs. The following predictions emerge: (i) a fall in corruption reduces illegal imports; while it raises legal imports when law enforcement is weak, but reduces legal imports when law enforcement is strong; (ii) stronger law enforcement decreases illegal imports; while it increases legal imports if the level of corruption is high, but decreases legal imports if the level of corruption is low; and (iii) a higher environmental tariff reduces legal imports; while its effect on illegal imports depends on the level of corruption and law enforcement. Using panel data, we find evidence that generally supports the theoretical conjectures concerning legal imports and, indirectly, allows us to draw inferences about illegal imports, even though the data on illegal trade do not exist. |
