State Capacity and the Environmental Investment Gap in Authoritarian States

Abstract

We construct an n-period, constrained optimization model where the authoritarian ruler maximizes expected rents subject to budget constraint of available surplus. We show that the larger state capacity is in the previous period, the worse environmental quality will be in the next period: while infrastructural investment and environmental protection increase with state capacity, the former increases at a faster rate which enlarges the gap between the two—the environmental investment gap. Given infrastructural public goods typically damage the environment, the larger this gap is the worse the environmental quality would be. This follows from rulers’ optimizing logic of equating marginal returns once we assume the declining marginal productivity of factors of production of surplus. We model three types of air and water pollutants in autocracies as a function of state capacity and other relevant variables. State capacity is associated with higher levels of all three types of pollutants.