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A Southern Perspective on Public Choice and Efficiency of Environmental Policy in Heterogeneous Society: The Impact of Population Mobility

Joshua Gogo, Department of Economics, Carleton University, Ottawa, Canada
jgogo@connect.carleton.ca

This paper studies the institutional requirements for efficiency and equity in environmental policy design in southern democracies with fiscal federalism and geographical representation. It focuses on the democracies in which the government is actively involved in mineral exploitation as a major source of revenue; with limited ability to generate revenue through taxes, and the negative externality causing industry is highly localized and immobile. It employs a public choice approach to the conflicting requirement for public good provision and environmental efficiency in a heterogeneous society.
The literature has largely focused on advanced democracies of the north, in which economic activities are fully privatized and government revenues are mostly, if not all, from taxes and duties. The motivation is therefore to broaden the scope of the discourse to include southern perspectives and complexities in the design of environmental policy institutions.
In this model there is the possibility of multiple equilibra. There is no unanimity in the federal legislature. In majority rule, there is incentive to centralize environmental policy. This leads to measures that over burden the environment in mineral exploration by minimizing abatement cost, with possibility of conflicts with local communities resulting from displacement and disruption of local livelihood. On the other hand, because of the linkage between mineral exploration and local livelihood, excessive premium is placed on the environment by mineral producing communities. Therefore, decentralization of environmental policy will lead to measures that are also inefficient, with possibility of state failure.
By introducing population mobility and environmentalist non-governmental organizations, the model predicts that while there is the possibility of reduction in externality (improving efficiency), there is also the possibility of minority control of political power, which also leads to conflict.
Specialized institutions are required in these circumstances to efficiently mediate environmental policies outside the state and markets.