Corruption, Inequality, and Environmental Regulation

We develop two public choice models in which environmental regulation is determined endogenously in the presence of agents who are heterogenous in wealth or income. In the first model, regulation is determined by a majority vote, and an increase in inequality induces an increase in environmental standard. In the second model, the environmental standard is chosen by a corrupt bureaucrat. In that model, while the impact of an increase in inequality on the environmental standard is uncertain, a higher level of corruption always reduces the quality of environmental regulation. An empirical analysis using cross-country data confirms the implication of both models.