The economics of environmental crime [Elektronische Ressource] : theoretical aspects and econometric investigations / vorgelegt von Christian Alexander Almer

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The Economics of Environmental Crime:Theoretical Aspects andEconometric InvestigationsInaugural-Dissertation zur Erlangung der W?rde eines Doktors derWirtschaftswissenschaften (Dr. rer. pol.) an der Wirtschafts- undSozialwissenschaftlichen Fakult?t der Ruprecht-Karls-Universit?tHeidelbergvorgelegt im Januar 2009 vonChristian Alexander Almergeboren in AugsburgTomy wife Luisemy mother Edeltraudandmy father HelmutiAcknowledgementsThis dissertation has greatly bene?ted from the support, encouragement, andcritical comments of a number of people. In particular, my thanks are due tomy supervisor Prof. Timo Goeschl, Ph.D.. Without his scienti?c expertise andenthusiasm this dissertation would not have been completed in the present form.My thanks go also to Prof. Dr. Dr. h.c. mult. Friedrich Schneider for co-advisingon this work and his valuable suggestions.Moreover, I am grateful to Jochen Laps, Dr. Grischa Perino and Dr. Maik T.Schneider for their helpful comments during the last stage of this thesis.Thanks is also due to my colleagues, particularly Jan Dehne-Niemann, Jo-hannes Diederich, Johannes Jarke, Ole J?rgens, Dr. Christian Traeger, EdgarVogel and Travis Warziniack, Ph.D. for their help and several inspiring discus-sions. Furthermore, I would like to thank Lars Butzmann, Oleksandr Gavrysh,Katrin Heinzmann, Jan Pohle and Tao Yu for their assistance in collecting andstructuring the data the present thesis is based on.The dissertation also bene?

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The Economics of Environmental Crime:
Theoretical Aspects andEconometric Investigations
Inaugural-Dissertation zur Erlangung der W?rde eines Doktors der
Wirtschaftswissenschaften (Dr. rer. pol.) an der Wirtschafts- und
Sozialwissenschaftlichen Fakult?t der Ruprecht-Karls-Universit?t
Heidelberg
vorgelegt im Januar 2009 von
Christian Alexander Almer
geboren in AugsburgTo
my wife Luise
my mother Edeltraud
and
my father Helmut
iAcknowledgements
This dissertation has greatly bene?ted from the support, encouragement, and
critical comments of a number of people. In particular, my thanks are due to
my supervisor Prof. Timo Goeschl, Ph.D.. Without his scienti?c expertise and
enthusiasm this dissertation would not have been completed in the present form.
My thanks go also to Prof. Dr. Dr. h.c. mult. Friedrich Schneider for co-advising
on this work and his valuable suggestions.
Moreover, I am grateful to Jochen Laps, Dr. Grischa Perino and Dr. Maik T.
Schneider for their helpful comments during the last stage of this thesis.
Thanks is also due to my colleagues, particularly Jan Dehne-Niemann, Jo-
hannes Diederich, Johannes Jarke, Ole J?rgens, Dr. Christian Traeger, Edgar
Vogel and Travis Warziniack, Ph.D. for their help and several inspiring discus-
sions. Furthermore, I would like to thank Lars Butzmann, Oleksandr Gavrysh,
Katrin Heinzmann, Jan Pohle and Tao Yu for their assistance in collecting and
structuring the data the present thesis is based on.
The dissertation also bene?ted from helpful comments from seminar and con-
ference participants in Gothenburg, Graz, Heidelberg, Lille, Milan, Regensburg
and Zurich.
Heidelberg, January 2009 Christian Almer
iiContents
1 Introduction 1
1.1 Purpose of the Thesis and Main Findings . . . . . . . . . . . . . . . 1
1.2 Criminal Enforcement of Environmental Laws . . . . . . . . . . . . 8
1.3 Environmental Criminal Law in Germany. . . . . . . . . . . . . . . 10
1.4 Environmental Crime in Germany: 1973 - 2006 . . . . . . . . . . . 13
I Review of the Relevant Literature 21
2 The Economics of Crime Literature 21
2.1 The Basic Economic Model of Crime . . . . . . . . . . . . . . . . . 24
2.2 The Empirical Version of the Economic Model of Crime . . . . . . . 28
2.3 Deterrence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.3.1 Probability of Punishment . . . . . . . . . . . . . . . . . . . 30
2.3.2 Magnitude of Penalty . . . . . . . . . . . . . . . . . . . . . . 36
2.4 Incapacitation versus Deterrence. . . . . . . . . . . . . . . . . . . . 40
2.5 Socioeconomic Factors . . . . . . . . . . . . . . . . . . . . . . . . . 42
2.6 Empirical Shortcomings . . . . . . . . . . . . . . . . . . . . . . . . 47
2.6.1 Dark Figure . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
2.6.2 Endogeneity . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
2.6.3 Aggregation Bias . . . . . . . . . . . . . . . . . . . . . . . . 57
2.6.4 Time Lags . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
2.7 Does Empirical Analysis support Becker?s suggestions? . . . . . . . 59
3 The Economics of M&E of Environmental Regulation 61
iii3.1 The Theoretical Model of Enforcement and Compliance . . . . . . . 61
3.2 The Empirical Model of Enforcement and Compliance . . . . . . . . 64
3.3 Deterrence and Important Policy-Variables . . . . . . . . . . . . . . 66
3.3.1 Monitoring . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
3.3.2 Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
3.3.3 Structural Factors. . . . . . . . . . . . . . . . . . . . . . . . 70
3.4 Is there Evidence for the E⁄ectiveness of M&E? . . . . . . . . . . . 71
4 Di⁄erences between M&E and Criminal Enforcement 71
5 Conclusion to Part I 73
II Environmental Crime and Punishment 74
6 Introduction to Part II 74
7 The Determinants of Reported Environmental Crime 79
7.1 Deterrence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
7.2 Political Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
8 Data 86
9 The Econometric Model of Environmental Crime 89
10 Estimation Results 92
10.1 Deterrence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
10.2 Political Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
iv11 Robustness of the Estimates 96
11.1 Simultaneity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
11.2 Omitted Variables. . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
11.3 Additional Checks . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
12 Discussion 104
12.1 Interpreting the Results . . . . . . . . . . . . . . . . . . . . . . . . 104
12.2 Confronting Results with the Existing Literature and Part III . . . 107
12.2.1 Deterrence . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
12.2.2 Political Factors . . . . . . . . . . . . . . . . . . . . . . . . . 111
13 Conclusion to Part II 111
III Illegal Waste Disposals and Punishment 113
14 Introduction to Part III 113
15 The Determinants of Reported Illegal Waste Disposal 117
15.1 Deterrence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
15.2 Waste Market Determinants . . . . . . . . . . . . . . . . . . . . . . 119
15.3 Structural and Political Factors . . . . . . . . . . . . . . . . . . . . 121
16 Data 123
17 The Econometric Model of Illegal Waste Disposal 128
18 Estimation Results 129
18.1 Deterrence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
v18.2 Waste Market Variables . . . . . . . . . . . . . . . . . . . . . . . . 134
18.3 Political and Structural Factors . . . . . . . . . . . . . . . . . . . . 135
19 Robustness 137
19.1 Simultaneity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
19.2 Omitted variables . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140
19.3 Time Lags . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142
20 Discussion 143
20.1 Interpreting the Results . . . . . . . . . . . . . . . . . . . . . . . . 143
20.2 Confronting Results with Part II and the Existing Literature . . . . 146
20.2.1 Deterrence . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146
20.2.2 Political and Structural Factors . . . . . . . . . . . . . . . . 147
21 Conclusion to Part III 148
IV The Political Economy of Criminal Enforcement in
Environmental Law 150
22 Introduction to Part IV 150
23 Hypotheses on the Determinants of Enforcement Decisions 154
23.1 Police . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155
23.2 Prosecutors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157
23.3 Courts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159
23.4 Synopsis of Economic and Political Variable Predictions . . . . . . . 160
24 Data 163
vi25 Econometrics 165
25.1 Police . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167
25.2 Prosecution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171
25.3 Courts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175
26 Discussion 177
27 Conclusion to Part IV 181
28 Final Conclusions 183
28.1 The Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . 183
28.2 The Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184
28.3 Future Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187
References 189
V Appendix 208
A Appendix to section 1.3 208
B Appendix to Part II 211
B.1 The Development of Strong Green Support . . . . . . . . . . . . . . 211
B.2 Estimates for Di⁄erent Covariates . . . . . . . . . . . . . . . . . . . 212
C Appendix to Part IV 213
C.1 TheDevelopmentofEnforcementforEnvironmentalCrimesinGer-
many . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213
C.2 Estimates for Di⁄erent Covariates . . . . . . . . . . . . . . . . . . . 214
viiList of Tables
1 Types of Environmental Crime in the German Penal Code . . . . . 12
2 Variable De?nitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
3 Summary Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
4 Estimation Results 1 . . . . . . . . . . . . . . . . . . . . . . . . . . 91
5 Di⁄erence-in-Sargan Test for AB and BB . . . . . . . . . . . . . . . 97
6 Estimation Results 2 . . . . . . . . . . . . . . . . . . . . . . . . . . 99
7 Maddala-Wu Test of I(0) . . . . . . . . . . . . . . . . . . . . . . . . 102
8 Estimation Results for Lagged Deterrence Variables . . . . . . . . . 103
9 Estimation Results for Illegal Waste Disposal. . . . . . . . . . . . . 105
10 Variable De?nitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
11 Summary Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
12 Estimation Results 1 . . . . . . . . . . . . . . . . . . . . . . . . . . 131
13 Estimation Results 2 . . . . . . . . . . . . . . . . . . . . . . . . . . 132
14 Estimation Results 2, continued . . . . . . . . . . . . . . . . . . . . 133
15 Di⁄erence-in-Sargan Test . . . . . . . . . . . . . . . . . . . . . . . . 138
16 Estimation Results for Endogenous Treatment . . . . . . . . . . . . 139
17 Estimation Results including Additional Variables . . . . . . . . . . 141
18 Estimation Results Including Time Lags . . . . . . . . . . . . . . . 144
19 Summary of Predictions . . . . . . . . . . . . . . . . . . . . . . . . 162
20 Variable De?nitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 165
21 Summary Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . 166
22 Estimation Results for Police Production of Cleared Cases . . . . . 170
23 Estimation Results for Production of Suspects Prosecuted . . . . . 173
viii24 Estimation Results for Judges Production of Convicts . . . . . . . . 176
25 BC Estimates for Di⁄erent Covariates (Part II) . . . . . . . . . . . 212
26 BC Estimates for Di⁄erent Covariates (Part IV) . . . . . . . . . . . 214
ix