The Economics of Environmental Crime : Theoretical Aspects and Econometric Investigations

Abstract

The present thesis extends the economic literature on the enforcement of environmental regulations by empirically analysing the effectiveness of environmental criminal law. It is a shortcoming of the discussion on the merits of criminal sanctions for environmental offenses that the empirical evidence on their effectiveness has so far not been systematically examined. This contrasts with the case of administrative sanctions for which a rich literature is available. Furthermore and despite the obvious parallels with the types of criminal behaviour studied using the so-called 'economic model of crime', the theoretical and empirical economic literature on crime has also largely by-passed the area of environmental crime. Little is therefore known regarding the extent to which the 'calculus of deterrence' postulated by Becker is operational in the context of environmental crimes. The thesis consists of four parts. The first part is dedicated to a comprehensive literature review on the empirical evidence of the effectiveness of both administrative sanctions in environmental law and criminal sanctions in general law. The second part then analyses the deterrent hypothesis by means of the German environmental criminal code in a dynamic panel data context. Special attention is given to the problem of potentially substantial dark figures in the context of environmental crime. The results derived add in significant ways to the existing literature. The first new insight is that while a substantial part of the German legal literature characterizes the German environmental criminal code as ineffective and therefore redundant, the results indicate otherwise. While rarely used, enforcement instruments restricted to criminal sanctioning such as trial in a public court and prison rates have a substantial statistical effect on reported environmental crime rates. With a view to validating the economic theory of crime, there is clear evidence that the calculus of is indeed operational in the domain of environmental crime. The second insight is the importance of detection and reporting effort for understanding the variation in reported environmental crime. The third part empirically investigates the most common type of environmental crime in Germany, namely illegal waste disposal. Using panel data at the county level of Baden-Wurttemberg, this part of the thesis has two primary objectives. First, it provides a verification of the results obtained in part two with respect to the deterrence effects. The second objective is to identify further key factors that influence the amount of environmental crime and that go beyond the basic deterrence framework. Examples include structural, economic and political economy variables. Results are threefold. First, there is clear evidence that the deterrence effects found in the state-wide analysis carry over to the counties of Baden-Wurttemberg. Especially the fact of being tried in a public court again deters people from committing environmental crimes. Second, the analysis supports previous findings on the importance of structural and economic factors that influence illegal behaviour in general. Third, this part reveals new and more subtle political economy factors that play an important role in this setting. The fourth part of the thesis reverses the focus by testing whether the success of different institutions involved in the enforcement process is subject to political control or public pressure. The extent to which exterior political factors or public preferences influence the behaviour of police, prosecutions or courts is only incompletely examined in the literature. However, this question is of fundamental importance as enforcement institutions jointly determine the effectiveness of every monitoring and enforcement regime. Findings show that economic factors including opportunity cost arguments matter at all stages of enforcement. Moreover, it turns out that political economy variables influence the behaviour of police, prosecution and courts. In contrast to initial hypothesis, the degree of influence remains fairly constant at all stages of enforcement. The present thesis therefore extends both the economic literature on the enforcement of environmental regulations and the general economics of crime literature by empirically analyzing the effectiveness of environmental criminal law. The derived results contribute in a significant way to a better understanding of the functioning of criminal enforcement in the context of environmental law. It is able to close the gap in the existing literature and to provide necessary information for policy-makers in the US, UK and within the European Commission discussing whether to further strengthen or weaken the use of criminal law in this context.