Differences in pollution levels among civil law countries: A possible interpretation

The aim of this paper is to shed light on the way the legal systems of different countries can explain the discrepancies in their pollution levels. In particular, we underline the factors of capital accumulation and the financial market development, that are driven, among other things, by the various levels of protection accorded by the legal system to both shareholders and creditors. The research develops in two directions. Firstly, we supply a theoretical analysis to explain how constraints on the process of capital accruement affect the pollution level. In the model, a crucial role is assigned to the rate of interest, and its relationship with discount rates, which constitutes an important variable in decisions to implement anti-pollution devices. Secondly, we perform an econometric analysis using the data of eighty-five countries belonging to the legal family of civil law, for the period from 1992 to 2003, adopting four pollution indicators as dependent variables. Our main findings are that legal families and financial market development can help to explain the differences in environmental indicators observed among nations.