Doyle, Matthew Di Maria, Corrado Lange, Ian A. Lazarova, Emiliya
Year of Publication:
CESifo Working Paper 6127
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.
political economy electoral incentives term limits environmental policy pollution abatement compliance costs power plants water pollution regression discontinuity