Regulatory Stringency Research Articles

Environmental regulation, taxes, and activism

AbstractSocial activism is a burgeoning human response to pressing problems around the world, and nowhere is this response more apparent than in the ongoing global push back against environmental externalities. In this article, we explore—for the first time—whether there are degrees of activism that relate to degrees of regulatory stringency. Using data on environmental conflicts resulting from fossil fuel production across 68 countries over the period 1995–2014, we find that, for a given tax rate, a move from a lax to more stringent regime lowers the rate of environmental conflicts. These findings underscore the contingent role of policy stringency as a trigger for intense social movements.

E‐mobility in Slovakia by 2030—End of oil dependency?

AbstractMore European countries seriously depend on oil supplies from Russia primarily via one pipeline, which makes energy security weaker. This energy balance brings a massive problem for the import intensity; therefore, e‐mobility might be a potential solution for the trade deficits of many European countries. Battery Electric Vehicles and Plug‐In Hybrid Electric vehicles have been introduced within the priorities of the EC but also by car manufacturing companies worldwide. By 2050, massive growth of Electric vehicles (EVs) is expected, and significant changes in favour of electric cars have to be observed in new car sales till 2030. The article's main objective is to investigate whether and to what extent new sales of e‐cars bring lower oil imports to Slovakia. The authors use three scenarios (based on regression models) differentiating market force intensity and regulation stringency till 2030. The significant findings of the models provide an estimated number of EVs on Slovak roads in 2030 and significant oil import cuts stemming from oil import substitution. The conclusion suggests that by 2030, Slovak oil imports will only slightly decrease due to e‐mobility penetration, even in the most optimistic scenario.

Do political connections foster or hamper firm environmental investment?

Extant studies of environmental investment determinants have not distinguished between different types of political connections. This study tries to close this gap by employing an extensive dataset based on the four-yearly Chinese Private Enterprises Survey conducted between 2006 and 2012. The central question in this paper asks whether different political connections (ascribed vs. achieved) are fostering or hindering environmental protection expenditures in private enterprises. The results show that achieved political connections serve as binds of promoting firm environmental investment while ascribed political connections act as buffers, hampering firm environmental expenditures. The moderating roles of environmental regulation and innovation capability demonstrate heterogeneous effects: environmental regulation stringency strengthens the positive impact of achieved political connections only. In contrast, innovation capability enhances the negative impact of ascribed political connections.

JUE Insight: Measuring the Stringency of Land Use Regulation Using a Shadow Price Approach

I propose a shadow price approach to measuring the stringency of land use regulation. A regulation is considered more restrictive if the land developer is willing to pay a larger amount for a marginal relaxation of the regulation. I show that existing theory-based measures of land use stringency are either equivalents or variations of this shadow price measure. Using data from China, I demonstrate that it is possible to compare the stringency of two kinds of land use regulation, a key advantage of this shadow price approach.

Channeled through trade: How foreign environmental regulations induce domestic renewable energy innovation

Innovation and diffusion of renewable energy technologies is critical to meeting the demands of climate and environmental policies. An emerging body of literature shows that innovators respond to aggregate global demands for climate change mitigation technologies. Indeed, innovation and trade in renewable energy technologies has accelerated as countries throughout the globe have introduced more stringent environmental regulations to confront the climate crisis. Yet most of this research, while it does consider trade and competitiveness, fails to explicitly incorporate the foreign demand inducement effect—that is, foreign climate and environmental policies can induce innovation from innovators in other countries. In this study, we argue that trade acts as an important channel whereby foreign environmental regulatory stringency signals are conveyed to induce domestic renewable energy innovation. Based on a sample of 32 countries over 16 years, we find strong empirical evidence that foreign environmental regulations, weighted by bilateral trade, have significant innovation inducement effects across borders. Hence, our findings fill a critical gap in the literature by empirically exploring the interplay of green industrial policy, global political economy, trade, innovation, and development.

End-Of-Life Care In Assisted Living Communities: Race And Ethnicity, Dual Enrollment Status, And State Regulations.

Assisted living communities are the final home for many of their residents, most of whom are older, frail, and cognitively or functionally impaired. Yet little is known about end-of-life care in this setting. We examined associations of both death at home and home hospice care with individual characteristics, such as race or ethnicity and dual Medicare-Medicaid enrollment; community characteristics; and the stringency of state-level assisted living regulations. Of the 100,783 fee-for-service Medicare beneficiaries residing in 16,560 assisted living communities who died in 2018-19, almost 60percent died at home, 84percent of them with home hospice. In predicting the likelihood of death at home, dual Medicare-Medicaid enrollment was more important than race or ethnicity; in contrast, race was a stronger predictor than dual enrollment for hospice care at death. Residents were less likely to die at home or with home hospice in states with lower regulatory stringency regarding assisted living communities. These findings may help inform efforts to ensure equitable access to desired end-of-life care in this setting and suggest an important role for state-level regulation.

Строгость водородной стратегии

The main criterion for classifying hydrogen is the amount of carbon emissions generated during its production. Since only green hydrogen, received from renewable energy sources (RES), can be considered a fuel with a minimal carbon footprint, the article examines the question of to what extent the hydrogen strategies of various countries may be regarded as decarbonized. A typological approach is applied and a framework is established to define the stringency of green hydrogen regulation in national hydrogen strategies based on three parameters: fossil fuel penalties, hydrogen certification and exceptional technology development. According to these parameters, countries are classified into groups depending on the degree of regulation severity. The problems, associated with increasing the strictness of regulation for hydrogen production both at the national and international levels, are identified.

Government support for environmental regulation: Evidence from China

With an emphasis on innovation, Porter (1991) challenges the traditional wisdom and then hypothesizes a promotional effect of environmental regulation on firm performance. This paper reveals a complementary source, i.e., government support, to explain the promotional effect in a developing country. We use evidence from China to find a positive causal effect of environmental regulation stringency on firm performance. To justify our theory, we show that state ownership shares of a firm as an exogenous proxy for government support positively moderate the causal effect. We also use causal mediation analysis to document that loans from banks as the representative type of government support mediates the causal effect significantly in statistics and economics.

Trade Openness and Environmental Policy Stringency: Quantile Evidence

The intensively debated issue of whether trade globalization leads to a race (climb) to the bottom (top) such that environmental policy stringency is loosened (strengthened) is still far from being uncontroversial. This paper provides new empirical evidence from the standpoint of the North (advanced) countries using both the generalized methods of moment (GMM) and GMM quantile estimators for dynamic panel data models. It first investigates the importance of trade partners and finds, in a sample of OECD countries, that increased trade with the South (developing) countries leads to more stringent environmental regulation whereas heightened trade with the North eases environmental regulation. It then examines whether there exist differences across regimes with different extents of stringency in environmental regulation and finds significant regime-specific effects. Specifically, liberalizing trade with the North weakens environmental regulation stringency in a regime with medium stringency but reinforces it in a regime with high and low stringency. Conversely, expanded trade with the South raises environmental regulation stringency in a regime with medium stringency but deteriorates it in a regime with high and low stringency.

The impact of bank regulation on firms’ capital structure: Evidence from multinationals

This paper examines how the capital structure of non-financial firms is affected by international variation in bank regulation. A concise model yields an estimating equation that relates a firm's capital structure to bank regulatory variables and their interactions with the tax rate reflecting the tax deductibility of interest. We identify an effect of bank regulation on leverage by considering establishments of the same multinational firm located in different countries. Our results indicate that capital regulation stringency and official supervisory power are negatively related to firm leverage, while restrictions on non-lending activities and on financial conglomerates vary positively with firm leverage. High tax rates mitigate these effects.

환경규제, 기업 이질성, 그리고 기업의 혁신 활동에 대한 행태적 접근

Since Michael Porter (1991) has proposed that environmental regulation can help a firm increase its competitiveness by encouraging it to engage in more innovative activities to meet the environmental regulation, a number of researchers have empirically investigated the “Porter Hypothesis.” However, the empirical results still remain mixed. Combining the perspectives of the behavioral theory of the firm and firm heterogeneity, we argue that the levels of regulation stringency and time-pressure would differentially influence a firm’s innovative behavior depending on the firm’s aspiration level, performance feedback and technological capabilities. Using the U.S. Corporate Average Fuel Efficiency (CAFE) regulation context, we empirically demonstrate that lagging firms that do not meet the new regulation standard announced by the government tend to search for more distant knowledge and that the impact of the patents they file for decreases as the regulation becomes more stringent. In addition, we also find that as time-pressure increases, lagging firms stand to apply for more patents than do leading firms whereas the overall impact of the patents decreases. These results help us advance our understanding of the nuanced causal relationship between regulation and innovation and provide practical implications for policymakers.

Environmental regulation stringency and foreign direct investment

AbstractThe effects of environmental regulation stringency on foreign direct investment are noted in the existing literature. However, current literature appears to have ignored the feedback effects from foreign investment to environmental regulation stringency. This feedback effect plays a significant role in designing policies to attract foreign investment to support economic growth and improve environmental quality concurrently. This study examines the feedback effects from foreign investment on environmental regulation stringency using the Organisation for Economic Co‐operation and Development (OECD) newly developed Environmental Policy Stringency Index for 26 OECD countries for almost three decades since 1990. The key findings from this study to the existing literature are threefold. First, we find that foreign investment affects the environment regulation stringency via lobbying. However, when the number of legislative units in the host countries is large enough, the lobbying effect diminishes, particularly for the larger‐gross domestic product (GDP) and the higher‐per‐capita‐income OECD countries. Second, our empirical results confirm the U‐shaped relationship between manufacturing activities and the environmental regulation stringency. Third, the bilateral relationship between environmental regulation stringency and foreign investment is found, indicating that ignoring foreign investment in designing environmental policies is problematic. Finally, policy implications have emerged based on the findings from this study.

How Green Are the National Hydrogen Strategies?

Since Japan promulgated the world’s first national hydrogen strategy in 2017, 28 national (or regional, in the case of the EU) hydrogen strategies have been issued by major world economies. As carbon emissions vary with different types of hydrogen, and only green hydrogen produced from renewable energy can be zero-emissions fuel, this paper interrogates the commitment of the national hydrogen strategies to achieve decarbonization objectives, focusing on the question “how green are the national hydrogen strategies?” We create a typology of regulatory stringency for green hydrogen in national hydrogen strategies, analyzing the text of these strategies and their supporting policies, and evaluating their regulatory stringency toward decarbonization. Our typology includes four parameters, fossilfuel penalties, hydrogen certifications, innovation enablement, and the temporal dimension of coal phasing out. Following the typology, we categorize the national hydrogen strategies into three groups: zero regulatory stringency, scale first and clean later, and green hydrogen now. We find that most national strategies are of the type “scale first and clean later”, with one or more regulatory measures in place. This article identifies further challenges to enhancing regulatory stringency for green hydrogen at both national and international levels.

The GHG Emissions Assessment of Online Car-Hailing Development under the Intervention of Evaluation Policies in China

To assess the impact of the online car-hailing services on the environment in China, in this paper, we develop a model to evaluate greenhouse gas (GHG) emissions and emission reduction during the production and use of car-hailing, as a result of increased online bookings. Since energy use differs according to type of vehicle, this paper also contains different scenarios that depict degrees in the regulation stringency according to the Chinese Preliminary Rules on the Management of Online Car-Hailing, regional differences, and development of electric vehicles. The results show that, under the three different scenarios, the online car-hailing service would have the highest GHG emissions of 325, 413, or 160 MtCO2 and the highest reduction in emissions of 19.46, 25.1, or 9.48 MtCO2 by 2030. The government needs to encourage the development of online car-hailing to reduce the purchase of private cars, avoid compulsory actions to shut down online car-hailing platforms, and mandate that only electric vehicles (EVs) can be used for online car-hailing.

Relocate or Innovate? The Impact of Environmental Regulation Stringency on Pollution-Intensive Firms in China

Relocate or Innovate? The Impact of Environmental Regulation Stringency on Pollution-Intensive Firms in China

Environmental regulation and financial stability: Evidence from Chinese manufacturing firms

This paper evaluates the short-run economic and financial implications of tightening the environmental regulations. We build an Environmental Dynamic Stochastic General Equilibrium (E-DSGE) model that combines green policies aiming to reduce firms’ emission together with financial frictions and endogenous default. The simulation results show that tightening environmental policies dampens the positive impact of expansionary shocks, compromises the firms’ ability to repay loans, and consequently poses risks to the financial stability. For the empirical analysis, we examine the effect of environmental regulations tightened by the Chinese 11th Five-Year Plan on manufacturing firms’ productivity and its implications for the financial sector. Using the difference-in-difference approach, we find that the manufacturing firms’ productivity deteriorated due to the enhanced environmental regulation stringency, making the profitability and total output decline accordingly. As a result, firms located in the cities with higher emission reduction targets were more likely to default, threatening the financial stability.

Do Restrictive Land Use Regulations Make Housing More Expensive Everywhere?

This study makes three contributions to the debate over the effect of local land use regulations on housing prices and affordability. First, it is more geographically extensive than previous studies, encompassing 336 of the nation's 384 metropolitan areas. Second, it looks at multiple measures of regulatory stringency, not just one. Most prior studies have focused either on a single regulatory measure or index across multiple metropolitan areas, or multiple regulatory measures in a single region. Third, this paper considers the connection between regulatory stringency and housing values as a function of employment growth and per-worker payroll levels. We find that restrictive land use regulations do indeed have a pervasive effect on local home values and rents, and that these effects are magnified in faster-growing and more prosperous economies. We also find more restrictive land use regulations are not associated with faster rates of recent home value or rent growth, and that their effects on housing construction levels—that is, the degree to which they constrain supply—is uneven among different housing markets.

Environmental regulations and international trade: A quantitative economic analysis of world pollution emissions

We develop and quantitatively evaluate a general equilibrium trade model with pollution as a byproduct of production to study the interactions between international trade, the environment, and environmental regulations. Our analysis suggests that environmental regulations provide a source of comparative advantage, but we fail to find evidence that reducing trade barriers causes pollution-intensive industries to concentrate in countries with weak environmental regulation stringency. The reason is that as a crucial determinant of pollution emissions and abatement, environmental regulations are weak in determining international specializations. By comparing environmental regulation stringency with other determinants of international trade, we identify productivity and trade costs as being the major forces that suppress the influence of environmental regulations on deciding international production and trade. Furthermore, we incorporate endogenous environmental policy into our framework and explore how environmental policy responds to trade liberalization. We allow for strategic environmental policy, but find its use as a substitute for tariffs to be quite limited. We also evaluate various forces that determine the overall impacts of international trade on worldwide pollution emissions.

Political (Over)Representation of Public Sector Employees and the Double-Motive Hypothesis: Evidence from Norwegian Register Data (2007–2019)

Abstract Countries have widely diverging regulations regarding the eligibility of public sector employees for political office, and the stringency of such regulations remains fiercely debated. Building on a demand and supply model of political selection, this article contributes to such debates by studying whether and how the incentives of public employees as both consumers and producers of public services (their “double motive”) affects their descriptive political representation. Our analysis employs population-wide individual-level register data covering four Norwegian local elections between 2007 and 2019 (N > 13 million observations). Using predominantly individual-level panel regression models, we find that public employees are strongly overrepresented on election lists and have a higher probability of election (conditional on running). Looking at underlying mechanisms, we provide evidence consistent with the “double motive” of public employees inducing their self-selection into standing for elected office (at higher-ranked ballot positions). Demand-side effects deriving from party and voter selection receive more limited empirical support. We discuss ensuing concerns about the potential substantive representation of policy self-interests by elected public employees.

Comparing Environmental Risk Regulations in China and the United States

The relative stringency of risk regulation across countries may have significant implications for public health and environmental outcomes, as well as for economic and trade impacts. In this study, we build on prior literature-which has often employed qualitative case studies, and has often focused on comparing the United States and Europe-by using a quantitative evidential reasoning approach to compare the relative stringency of federal/central level written rules for 45 randomly selected environmental risks in the United States and China. We find that, on average, in this sample of 45 environmental risks, the written rules for environmental risk regulation were more stringent in the United States than in China. Within this sample, we find that relative stringency was selective, leaning in both directions, as the United States and China each regulated some risks more stringently than the other; for example, the US written rules were more stringent for risks of toxic chemicals and most air pollutants, whereas China's written rules were more stringent for risks in agriculture. We also observe nuanced differences in relative regulatory stringency within sectors and risks; even where one country regulated one risk more stringently, the other country may regulate certain aspects of that risk more stringently. We comment on possible explanations for the patterns we observe. Our methods and findings may contribute to better understanding of comparative risk regulation across the United States and China, and worldwide. We also recognize that in addition to the written rules studied here, countries may also vary in their implementation.