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Interregional competition, spillovers and attachment in a federation

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  • Silva, Emilson C.D.
  • Yamaguchi, Chikara

Abstract

We examine decentralized environmental policy making in a federation characterized by decentralized leadership and imperfect labor mobility due to attachment to regions. Energy consumption generates positive consumption benefits, but energy supply generates federal air pollution. Regional authorities regulate energy supply by controlling supplies of pollution permits. Energy and pollution permits are traded in interregional markets. The center redistributes incomes after it observes regional supplies of pollution permits. Regions are populated by mobile and immobile households and profits are expatriated. We show that the subgame perfect equilibrium for the federal policy game played by regional and central authorities is socially optimal.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Urban Economics.

Volume (Year): 67 (2010)
Issue (Month): 2 (March)
Pages: 219-225

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Handle: RePEc:eee:juecon:v:67:y:2010:i:2:p:219-225

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Web page: http://www.elsevier.com/locate/inca/622905

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Keywords: Federation Interregional spillovers Redistribution Labor attachment;

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References

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  1. Boadway, Robin, 1982. "On the Method of Taxation and the Provision of Local Public Goods: Comment," American Economic Review, American Economic Association, vol. 72(4), pages 846-51, September.
  2. Myers & G.M., 1989. "Optimality, Free Mobility And The Regional Authority In Federation," Working Papers 10, John Deutsch Institute for the Study of Economic Policy.
  3. Wellisch, Dietmar, 1994. "Interregional spillovers in the presence of perfect and imperfect household mobility," Journal of Public Economics, Elsevier, vol. 55(2), pages 167-184, October.
  4. Mansoorian, Arman & Myers, Gordon M., 1993. "Attachment to home and efficient purchases of population in a fiscal externality economy," Journal of Public Economics, Elsevier, vol. 52(1), pages 117-132, August.
  5. Caplan, Arthur J. & Cornes, Richard C. & Silva, Emilson C. D., 2000. "Pure public goods and income redistribution in a federation with decentralized leadership and imperfect labor mobility," Journal of Public Economics, Elsevier, vol. 77(2), pages 265-284, August.
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Cited by:
  1. Anping Chen & Nicolaas Groenewold, 2012. "The Regional Economic Effects of a Reduction in Carbon Emissions and An Evaluation of Offsetting Policies in China," Economics Discussion / Working Papers 12-14, The University of Western Australia, Department of Economics.
  2. Boadway, Robin & Song, Zhen & Tremblay, Jean-François, 2013. "Non-cooperative pollution control in an inter-jurisdictional setting," Regional Science and Urban Economics, Elsevier, vol. 43(5), pages 783-796.
  3. Arthur Caplan & Emilson Silva, 2011. "Impure public goods, matching grant rates and income redistribution in a federation with decentralized leadership and imperfect labor mobility," International Tax and Public Finance, Springer, vol. 18(3), pages 322-336, June.

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