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Formal and Informal Regulation of Industrial Pollution: Comparative Evidence from Indonesia and the United States

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  • Pargal, Sheoli, et al

Abstract

Economic theory and recent empirical work suggest that when formal regulation of pollution is absent or less than 100 percent effective, affected communities are often able to negotiate abatement from plants in their vicinity through "informal regulation. Using a model of equilibrium pollution, this article confirms the existence of significant informal regulation for unregulated pollutants in both Indonesia and the United States as well as for regulated pollutants in the United States. Combining plant-level data with community data in both countries, regressions reveal that even after controlling for traditional economic variables such as output levels and input prices as well as for plant characteristics such as industrial sector and age, the per capita income of affected communities significantly affects pollution intensities. Higher-income communities win significantly lower emissions in both countries and for both unregulated and regulated pollutants in the United States, presumably because income affects both preferences for environmental quality and the ability to bring pressure on polluting factories. Copyright 1997 by Oxford University Press.

Suggested Citation

  • Pargal, Sheoli, et al, 1997. "Formal and Informal Regulation of Industrial Pollution: Comparative Evidence from Indonesia and the United States," The World Bank Economic Review, World Bank, vol. 11(3), pages 433-450, September.
  • Handle: RePEc:oup:wbecrv:v:11:y:1997:i:3:p:433-50
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    Cited by:

    1. Bei Xiong & Ruimei Wang, 2020. "Effect of Environmental Regulation on Industrial Solid Waste Pollution in China: From the Perspective of Formal Environmental Regulation and Informal Environmental Regulation," IJERPH, MDPI, vol. 17(21), pages 1-17, October.
    2. Yanli Ji & Jie Xue & Kaiyang Zhong, 2022. "Does Environmental Regulation Promote Industrial Green Technology Progress? Empirical Evidence from China with a Heterogeneity Analysis," IJERPH, MDPI, vol. 19(1), pages 1-23, January.
    3. Mao, Yihuan & Lin, Yan, 2024. "Do more hands make work easier? Public supervision and corporate green innovation," International Review of Economics & Finance, Elsevier, vol. 91(C), pages 1064-1083.
    4. Hettige, Hemamala & Mani, Muthukumara & Wheeler, David, 2000. "Industrial pollution in economic development: the environmental Kuznets curve revisited," Journal of Development Economics, Elsevier, vol. 62(2), pages 445-476, August.
    5. Hua Wang, 2000. "Pollution charges, community pressure, and abatement cost of industrial pollution in China," Policy Research Working Paper Series 2337, The World Bank.
    6. Gangadharan, Lata, 2006. "Environmental compliance by firms in the manufacturing sector in Mexico," Ecological Economics, Elsevier, vol. 59(4), pages 477-486, October.
    7. Natalie Stoeckl, 2004. "The private costs and benefits of environmental self‐regulation: which firms have most to gain?," Business Strategy and the Environment, Wiley Blackwell, vol. 13(3), pages 135-155, May.
    8. Runa Sarkar, 2008. "Public policy and corporate environmental behaviour: a broader view," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 15(5), pages 281-297, September.
    9. Kathuria, Vinish, 2007. "Informal regulation of pollution in a developing country: Evidence from India," Ecological Economics, Elsevier, vol. 63(2-3), pages 403-417, August.
    10. Xie, Rong-hui & Yuan, Yi-jun & Huang, Jing-jing, 2017. "Different Types of Environmental Regulations and Heterogeneous Influence on “Green” Productivity: Evidence from China," Ecological Economics, Elsevier, vol. 132(C), pages 104-112.
    11. Jia Xu & Jiuchang Wei & Haipeng (Allan) Chen, 2019. "Strategic responses of stigmatized Chinese manufacturing firms to formal and informal environmental regulative pressures through enhanced corporate social responsibility effort," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 26(6), pages 1235-1260, November.
    12. Bin Fan & Mingyang Li, 2022. "The Effect of Heterogeneous Environmental Regulations on Carbon Emission Efficiency of the Grain Production Industry: Evidence from China’s Inter-Provincial Panel Data," Sustainability, MDPI, vol. 14(21), pages 1-27, November.
    13. Li Guangqin & Luo Ji & Liu Siyan, 2024. "Performance Evaluation of Economic Relocation Effect for Environmental Non-Governmental Organizations: Evidence from China," Economics - The Open-Access, Open-Assessment Journal, De Gruyter, vol. 18(1), pages 1-18.
    14. Zhao, Congyu & Dong, Kangyin & Wang, Kun & Dong, Xiucheng, 2022. "How does energy trilemma eradication reduce carbon emissions? The role of dual environmental regulation for China," Energy Economics, Elsevier, vol. 116(C).
    15. Wang,Hua*Ming Chen, 1999. "How the Chinese system of charges and subsidies affects pollution control efforts by China's top industrial polluters," Policy Research Working Paper Series 2198, The World Bank.
    16. Heyes, Anthony & Kapur, Sandeep, 2012. "Community pressure for green behavior," Journal of Environmental Economics and Management, Elsevier, vol. 64(3), pages 427-441.
    17. Zeno F. Levy & Richard C. Smardon & James S. Bays & Daniel Meyer, 2014. "A Point Source of a Different Color: Identifying a Gap in United States Regulatory Policy for “Green” CSO Treatment Using Constructed Wetlands," Sustainability, MDPI, vol. 6(5), pages 1-21, April.
    18. Timo Goeschl & Ole Jürgens, 2012. "Environmental quality and welfare effects of improving the reporting capability of citizen monitoring schemes," Journal of Regulatory Economics, Springer, vol. 42(3), pages 264-286, December.
    19. Vinish Kathuria, 2004. "INFORMAL REGULATION OF POLLUTION IN A DEVELOPING COUNTRY ; Empirical Evidence from Gujarat, India A," Working Papers 2004-02, Madras School of Economics,Chennai,India.
    20. Zheng, Qiaoqiao & Wan, Liang & Wang, Shanyong & Chen, Zexian & Li, Jun & Wu, Jie & Song, Malin, 2023. "Will informal environmental regulation induce residents to form a green lifestyle? Evidence from China," Energy Economics, Elsevier, vol. 125(C).
    21. Wang, Hua & Wheeler, David, 2005. "Financial incentives and endogenous enforcement in China's pollution levy system," Journal of Environmental Economics and Management, Elsevier, vol. 49(1), pages 174-196, January.
    22. Anabela Botelho & Lígia M. Costa Pinto & Isabel Rodrigues, 2005. "How To Comply With Environmental Regulations? The Role Of Information," Contemporary Economic Policy, Western Economic Association International, vol. 23(4), pages 568-577, October.

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