Corruption and Environmental Policy: Evidence from the European Union

The environmental problems, stemming from the economic development, also due to mismanagement, incompleteness, and structural defects in the market system. The study identifies the economic, socio-economic, and political parameters that affect certain environmental indices. In the first part of the work, we present a literature review connecting the environmental policy with income, corruption, and shadow economy. Then, using the fixed and the random effects panel data techniques; we examine which parameters affect environmental policy performance, energy generated from renewable resources, an d greenhouse gas emissions. The panel encompasses annual data from 24 out of 27 European Union countries, for the period 2000-2007. We find that corruption and shadow economy have negative effect on the environmental indices, while they reinforce each other. However, income has positive effect on indices except from emissions. The findings an contribute to clarify institutional issues of he environmental policy and should be useful for politicians an anyone else who consider environmental policy performance issues.