Corruption, illegal trade and compliance with the Montreal Protocol

Abstract

This paper studies the effects of corruption, rule of law and tariffs on illegal trade in chlorofluorocarbons (CFCs) controlled by the Montreal Protocol. Since data on illegal trade is not available, it is not possible to test any theoretical conclusions about smuggling. The paper, however, attempts to circumvent the problem by developing a model of illegal trade in CFCs that derives predictions about the effects of corruption, rule of law and tariffs on both legal and illegal imports of CFCs. Then the theoretical predictions concerning legal imports are tested using panel data on CFC consumption. Using the estimates of legal imports, inferences about illegal trade are made. The basic findings indicate that knowledge about the degree of rule of law, corruption and the level of tariffs is needed for the correct interpretation of the data on environmental performance reported to international monitoring agencies.

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Abbreviations

CFC:

Chlorofluorocarbon

ODS:

Ozone-depleting substance

UNEP:

United Nations Environment Program

ODP:

Ozone-depleting potential

ICRG:

International Country Risk Guide

PRS:

Political Risk Services

CEIT:

Countries with economies in transition

ML:

Maximum Likelihood

OLS:

Odinary Least Squares

LR:

Likelihood Ratio

EU:

European Union

TRAINS:

Trade Analysis and Information System

UNCTAD:

United Nations Conference on Trade and Development

GDP:

Gross domestic product

EIA:

Environmental Investigation Agency

REML:

Restricted Maximum Likelihood

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Correspondence to Kate Ivanova.

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Ivanova, K. Corruption, illegal trade and compliance with the Montreal Protocol. Environ Resource Econ 38, 475–496 (2007). https://doi.org/10.1007/s10640-007-9088-5

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Keywords

  • Corruption
  • Environment
  • Illegal
  • Law
  • Montreal Protocol
  • Tariff
  • Trade