Title: Regulating the environment: Economic development and the states
Abstract: Abstract Policy makers at all levels of government would likely agree on the desirability of both a growing economy and a clean, healthy environment. Yet, for decades there has been a widely held belief that environmental controls have undermined economic competitiveness. Thus, state policy makers are often confronted with choices between protecting the environment and promoting economic development. The work presented in this article identifies the various linkages between state environmental programs and economic growth. In this article, I apply an empirical model, based on transaction cost theory, to state manufacturing industries and investigate how well the double-focus of industry growth and environmental protection has been developed in the states. The results presented here indicate the potential for certain state environmental administrative structures to enhance economic growth by reducing uncertainty and transaction costs. Introduction The relationship between environmental goals and industrial competitiveness has conventionally been thought of as involving a tradeoff between social benefits and private costs. The traditional view is that firms pursue efficiency at the expense of environmental protection. Markets can induce over-consumption of environmental resources, such as clean air. Reciprocally, environmental concerns are often blamed for undermining market performance. Environmental regulation can lead to undue costs and prevent the unfettered behavior needed for achieving economic development. State policy makers would likely agree on the desirability of both a growing economy and a clean and healthy environment. Yet, for decades there has been a widely held belief that environmental controls have undermined economic competitiveness. Thus, state policy makers are often confronted with the choices of protecting the environment or promoting economic development. Anecdotes about ruined by environmental regulation abound. However, some scholars and political leaders have suggested this tradeoff is false. In recent years there have been an equal number of anecdotes about pulled back from the brink of failure through environmental efficiency. Stories about the growth of green companies give rise to the argument that policies of environmental protection can actually spur economic growth. Recently, several studies have reported positive cross-sectional correlations between levels of state environmental protection and personal income, but do not provide systematic explanations for how environmental programs enhance economic growth or subject their hypotheses to rigorous empirical tests (cf. Meyer, 1992; Hall, 1994; Kromm et al., 2000). The work presented here identifies the various linkages between state environmental programs and economic growth. In particular, I am interested in how the administrative design of environmental programs influences state economies. In this paper I apply an empirical model based on transaction cost theory to state manufacturing industry employment and investigate how well the double-focus of industry growth and environmental protection has been developed in the states. The model and empirical results presented here indicate the potential for certain state administrative structures to enhance economic growth by reducing uncertainty and transaction costs. The Tradeoff Literature Increasingly the assumption of a tradeoff between environmental protection and economic growth at the state level has been challenged. For example, a recent study by the Institute for Southern Studies correlated state rankings on economic and environmental indicators and found that the states that do the most to protect their environment also have the strongest economies. The conclusion reached by the authors was that policy makers do not have to choose between jobs and the environment (Kromm et al., 2000). Although such work is informative, it suffers from a number of limitations. …
Publication Year: 2003
Publication Date: 2003-01-01
Language: en
Type: article
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