Environmental Technology Choice in the Presence of Corruption and the Rule of Law Enforcement

The adoption of environmental technologies is almost always driven by the regulation that is interdependent with the strength of the rule of law. The authors of the article consider the Acemoglu, Verdier (2000) model in the particular case of environmentally friendly technology to investigate the mechanism by which the enforcement of the rule of law leads to a more efficient establishment of pollution abatement standard, the neutralization of even low levels of pollution and the adoption of environmental technology. A more stringent rule of law contributes to the achievement of the second-best allocation with less resource drainage caused by the rent-seeking activities and with lower intervention costs. It has been confirmed that in order to avoid technology adoption failures, it is necessary to tighten the rule of law to guarantee effective monitoring and enforcement of environmental standards.