This paper studies the link between public policy and corruption in the case of wind energy. It shows that publicly subsidized renewable energy can attract criminal appetites and favor the formation of criminal associations between entrepreneurs and politicians, capable of influencing the licensing process. Data from a simple model of political influence by interest groups are empirically tested using data from Italy for the years 1990-2007. Using a different approach, the impact of a Green Certificate policy aimed at supporting renewable energy is quantified, and solid evidence is found that criminal association activity increased more in windy provinces after the introduction of the generous policy regime. The magnitude of the effect is large: the construction of an average wind farm is associated with a 6% increase in criminal activity in the treatment compared to the control group. The findings show that in the presence of poor institutions, even well-designed, market-based policies can have an adverse impact. The analysis is relevant for countries that are generally characterized by heavy bureaucracies, weak institutions, and a large renewable potential. (Free translation and adaptation)

Year of publication: 2016

Author: Caterina Genniaoli and Massimo Tavoni

Promoter Entity: Public Choice (Scientific Journal)

See more: https://link.springer.com/article/10.1007/s11127-016-0322-y