Political 'colour' and firm behaviour: Evidence from U.S. power plants' pollution abatement

Di Maria, Corrado ORCID: https://orcid.org/0000-0002-3048-0506, Lazarova, Emiliya ORCID: https://orcid.org/0000-0002-7178-0644 and Lange, Ian (2024) Political 'colour' and firm behaviour: Evidence from U.S. power plants' pollution abatement. Environmental and Resource Economics. ISSN 0924-6460 (In Press)

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Abstract

We ask whether firms behave differently depending on the political party in charge, above and beyond responding to any actual differences in policy. We use the pollution abatement behaviour of U.S. Steam Electric Power Plants under the Clean Water Act as our case study. Exploiting the variation provided by the outcome of tightly contested gubernatorial elections, we provide causal evidence that large firms respond to the political `colour' of the governor in the state they operate, even when neither the stringency nor the enforcement of the rules depend on it. Within a theoretical model of the interaction between the regulator and the regulated firms, we show that multiple equilibria arise, and the outcomes of the election provide an effective coordination device. This unexpected behaviour has real-world consequences and leads to significant differences in pollution levels.

Item Type: Article
Faculty \ School: Faculty of Social Sciences > School of Economics
University of East Anglia Research Groups/Centres > Theme - ClimateUEA
UEA Research Groups: Faculty of Science > Research Centres > Centre for Social and Economic Research on the Global Environment (CSERGE)
University of East Anglia Schools > Faculty of Science > Tyndall Centre for Climate Change Research
Faculty of Science > Research Centres > Tyndall Centre for Climate Change Research
Faculty of Social Sciences > Research Groups > Applied Econometrics And Finance
Faculty of Social Sciences > Research Groups > Economic Theory
Faculty of Social Sciences > Research Groups > Environment, Resources and Conflict
Depositing User: LivePure Connector
Date Deposited: 12 Mar 2024 10:30
Last Modified: 12 Mar 2024 10:30
URI: https://ueaeprints.uea.ac.uk/id/eprint/94641
DOI:

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