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Clean or dirty energy: evidence of corruption in the renewable energy sector

Author

Listed:
  • Gennaioli, Caterina
  • Tavoni, Massimo

Abstract

This paper studies the link between public policy and corruption for the case of wind energy. We show that publicly subsidized renewable energy can attract criminal appetites and favor the formation of criminal associations between entrepreneurs and politicians able to influence the licensing process. The insights of a simple model of political influence by interest groups are tested empirically using Italian data for the period 1990-2007. Using a difference in difference approach we quantify the impact of a Green Certificate policy aimed at supporting renewables, and find robust evidence that criminal association activity increased more in windy provinces after the introduction of the generous policy regime. The magnitude of the effect is large: the construction of an average wind park is associated with an increase of criminal association activity of 6% in the treatment compared to the control group. Our findings show that in the presence of poor institutions, even well designed market-based policies can have an adverse impact. The analysis is relevant for countries which are generally characterized by heavy bureacracies, weak institutions and by large renewable potential.

Suggested Citation

  • Gennaioli, Caterina & Tavoni, Massimo, 2016. "Clean or dirty energy: evidence of corruption in the renewable energy sector," LSE Research Online Documents on Economics 65173, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:65173
    as

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    File URL: http://eprints.lse.ac.uk/65173/
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    References listed on IDEAS

    as
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    7. Axel Dreher & Martin Gassebner, 2013. "Greasing the wheels? The impact of regulations and corruption on firm entry," Public Choice, Springer, vol. 155(3), pages 413-432, June.
    8. Arezki, Rabah & Brückner, Markus, 2011. "Oil rents, corruption, and state stability: Evidence from panel data regressions," European Economic Review, Elsevier, vol. 55(7), pages 955-963.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    corruption; government subsidies; natural resources; renewable energy.;
    All these keywords.

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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