Electoral Incentives and Firm Behavior: Evidence from U.S. Power Plant Pollution Abatement

28 Pages Posted: 18 Nov 2016

See all articles by Matthew Doyle

Matthew Doyle

University of Waterloo

Corrado Di Maria

University of East Anglia

Ian Lange

University of Stirling - Department of Economics

Emiliya A. Lazarova

Queen's University Belfast

Date Written: October 18, 2016

Abstract

Researchers have utilized the fact that many states have term limits (as opposed to being eligible for re-election) for governors to determine how changes in electoral incentives alter state regulatory agency behavior. This paper asks whether these impacts spill over into private sector decision-making. Using data from gubernatorial elections in the U.S., we find strong evidence that power plants spend less in water pollution abatement if the governor of the state where the plant is located is a term-limited democrat. We show that this evidence is consistent with compliance cost minimization by power plants reacting to changes in the regulatory enforcement. Finally, we show that the decrease in spending has environmental impacts as it leads to increased pollution.

Keywords: political economy, electoral incentives, term limits, environmental policy, pollution abatement, compliance costs, power plants, water pollution, regression discontinuity

JEL Classification: H320, H760, Q250, Q530, Q580

Suggested Citation

Doyle, Matthew and Di Maria, Corrado and Lange, Ian and Lazarova, Emiliya A., Electoral Incentives and Firm Behavior: Evidence from U.S. Power Plant Pollution Abatement (October 18, 2016). CESifo Working Paper Series No. 6127, Available at SSRN: https://ssrn.com/abstract=2871168 or http://dx.doi.org/10.2139/ssrn.2871168

Matthew Doyle

University of Waterloo ( email )

Waterloo, Ontario N2L 3G1
Canada

Corrado Di Maria (Contact Author)

University of East Anglia ( email )

Norwich Research Park
Norwich, Norfolk NR4 7TJ
United Kingdom
441603592866 (Phone)

Ian Lange

University of Stirling - Department of Economics ( email )

Stirling, FK9 4LA
United Kingdom

Emiliya A. Lazarova

Queen's University Belfast ( email )

25 University Square
Belfast, BT7 1NN
Ireland

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