Modeling governance and water pollution using the institutional ecological economic framework

a r t i c l e i n f o This paper investigates the effect of governance on levels of water pollution for all industrial activities as well as by some specific industry category in a sample of OECD economies. Using an institutional ecological economic conceptual framework, the effects of several measures of governance are empirically examined. Our findings reveal that the rule of law, regulatory quality, control of corruption, government effectiveness and voice and accountability are negatively and statistically significantly correlated with water pollution across all industrial activities as well as specific industry groups. We conclude that governance matters for mitigating industrial water pollution. This novel paper adds to the existing literature on industrial water pollution by developing a modeling approach that empirically examines questions that have so far not been explored in institutional ecological economics and demonstrates the importance of the framework for addressing real life ecological problems that are common across the world. Policy implications are drawn. This paper investigates the impact of country level governance on water pollution levels by all industrial activities as well as specific industry categories in a sample of the OECD economies. Using an institutional ecological economic conceptual framework (for example, Paavola, 2007; Paavola and Adger, 2005), five measures of governance—the rule of law; regulatory quality; control of corruption; government effectiveness; and voice and accountability; are chosen and their effects on water pollution are tested using crosscountry data. In examining this relationship, the empirical analysis uses the generalized methods of moment estimation and tests several models of water pollution by all industrial activities as well as by specific groups of industries. Water pollution has long been considered in the economic literature, but with a limited number of approaches. Complementary to this, governance research has progressed significantly during the last two decades. In addition, ecological economics has developed new approaches to address challenges of environmental management. This paper takes analysis forward by building on these three stands in the literature in order to empirically examine questions that to date have only been addressed conceptually in the institutional ecological economic literature. Our work makes several new specific contributions to the ecological economic literature in terms of understanding the role of governance in mitigating water pollution. First, it focuses on water research, an area of research that is highly relevant from an ecological economic research perspective. Second, it examines the effect of five dimensions …