Analysis of Public Subsidies to the Solar Energy Sector: Corruption and the Role of Institutions

27 Pages Posted: 11 Jul 2017

See all articles by Fabio Moliterni

Fabio Moliterni

Fondazione Eni Enrico Mattei (FEEM)

Date Written: June 2017

Abstract

This study investigates the connection between rent-seeking behaviour, corruption activity and quality of institutions to empirically evaluate the unexpected implications of an energy policy for criminal activity. The object of this research is a program of public subsidies introduced in Italy in 2005, which successfully boosted the solar energy sector but seems to have generated a growth of corruption activity, arisen from the opportunity of rent extraction. In particular, according to the main hypothesis of this research, bribery is expected to rise significantly where big photovoltaic plants are concentrated and administrative procedures are more complicated. To determine the causal effect of the subsidies on corruption, the study employs a Difference-in-Difference methodology on a sample of 76 Italian provinces and exploits solar radiation as exogenous variable to discriminate the profitability of investments and bribing. Results confirm that, in poor-institutions areas, the growth of the solar sector in sunniest provinces has gone hand in hand with increasing corruption. Results suggest that policy makers should pay additional attention to the potential distortions of public policies implying large rent opportunities, in areas where the weakness of institutional settings and the bureaucratic complexities encourage illegal behaviour.

Keywords: Renewable Energy, Corruption, Public Subsidies, Legal Institutions

JEL Classification: O13, D73, P47, H23

Suggested Citation

Moliterni, Fabio, Analysis of Public Subsidies to the Solar Energy Sector: Corruption and the Role of Institutions (June 2017). FEEM Working Paper No. 33.2017, Available at SSRN: https://ssrn.com/abstract=2998543 or http://dx.doi.org/10.2139/ssrn.2998543

Fabio Moliterni (Contact Author)

Fondazione Eni Enrico Mattei (FEEM) ( email )

C.so Magenta 63
Milano, 20123
Italy

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