Water Quality and Environmental Treatment

Facilities

Kim, Chang and Kelleher

Presented at APPAM International ConferenceJune 12, 2009

Overview of the paper• Question : Has increased investment in basic

treatment facilities improved the water quality in waterways in Korea?

• Conclusion : Yes, building treatment facilities has contributed to improving the water quality even with consideration of the negative effect through reduced enforcement effort.

• An important policy implication : Building treatment facilities alone does not guarantee water quality, but depends in addition on proper regulation and enforcement

Theory

• The investment in basic treatment facilities has both a direct, positive effect on water quality and an indirect, negative effect on water quality.

• The reason for a negative effect is that the investment could affect a budget-constrained regulatory agency’s choice in a way that would perversely encourage the regulated firms’ emissions.

• Stackelberg Model of a regulatory agency and n homogeneous regulated firms.

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Estimation Equations

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iiiii

WWPUNSENFBEF

PREWWBEFWQ

2222120

113121110

_

Data

• Data regarding the four main rivers in Korea

• Yearly data covering 1991 through 2006

• Not river-specific, but aggregate data

Summary Statistics

Table 1 (2SLS)

Coef. Stand.E t value P value

ENF_PUNS -.0054713 .0017109 -3.20 0.007

WW 3.295825 1.222797 2.70 0.018

CONS -2379.322 9729.518 -0.24 0.811

Table 2 (2SLS)

Coef. Stand.E t value P value

BEF hat -.0000924 .0000227 -4.07 0.002

WW .000442 .0001238 3.57 0.004

PRE -6.60e-06 3.30e-06 -2.00 0.069

CONS 1.72111 .7243013 2.38 0.035

Table 3 (OLS)

Coef. Stand.E t value P value

BEF -.0000544 .0000191 -2.86 0.014

WW .0002819 .0001251 2.25 0.044

PRE -1.49e-06 4.18e-06 -0.36 0.728

CONS 2.223159 .8259682 2.69 0.020

Previous Studies and Our Contribusiton

• Garvie and Keeler (1994), Neilson and Kim (2001)

• Kwak and Kim (1995), Kang (2003)

• Kim and Chang (2007)