Environmental and Resource Economics

, Volume 52, Issue 1, pp 65–85 | Cite as

Assessing the Impact of Formal and Informal Regulations on Environmental and Economic Performance of Brazilian Manufacturing Firms

Article

Abstract

This study investigates the impact of formal and informal regulations on environmental and economic performance of Brazilian manufacturing firms. We adopt a dual approach where production technology is represented by a cost function, approximated by a translog form. Pollution is considered as a negative by-product that can be modified trough using either formal regulation (inspections or sanctions) or informal regulation (community pressure). A simultaneous equation model is estimated by three-stage least squares on a sample of 404 industrial establishments located in the state of São Paulo, Brazil. We show that pollution abatement costs for the Brazilian manufacturing sector are different from zero which suggests that pollution emissions are affected by environmental regulation. We also demonstrate that environmental performance of firms is jointly affected by formal and informal regulation. Lastly, formal regulation is largely influenced by informal regulation and more specifically by community pressure.

Keywords

Environmental regulation Informal regulation Firms Costs Brazil 

JEL Classification

Q21 Q25 L5 

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Copyright information

© Springer Science+Business Media B.V. 2011

Authors and Affiliations

  1. 1.Institute for Applied Economics Research (IPEA)Rio de JaneiroBrazil
  2. 2.Toulouse School of Economics (LERNA-INRA)Université de Toulouse 1 CapitoleToulouseFrance

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