Choice and design of regulatory instruments in the presence of green consumers
AbstractUsing a vertically differentiated product model, this paper examines welfare implications of various government policies in a situation where consumers are environmentally discerning. It studies ad valorem taxes/subsidies and emission taxes. The optimal policy depends on the magnitude of damage parameter associated with environmental externality. For a given distribution of tastes and preferences, as the damage parameter increases from a low to a high value, the optimal policy shifts from an ad valorem tax to an ad valorem subsidy. It also shows that for a sufficiently low damage parameter, an ad valorem tax dominates an emission tax.
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Bibliographic InfoArticle provided by Elsevier in its journal Resource and Energy Economics.
Volume (Year): 30 (2008)
Issue (Month): 3 (August)
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Web page: http://www.elsevier.com/locate/inca/505569
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