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Liability for Past Environmental Contamination and Privatization

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  • Dietrich Earnhart
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    Abstract

    This paper examines the role ofliability for past environmental contaminationin the privatization processes of Central andEastern Europe. In particular, it establishes alink between a risk-averse investor's amount ofinformation regarding the extent of pastenvironmental contamination (and its cleanupcosts) and the investor's willingness to payfor a particular enterprise, i.e., bid. As theinvestor obtains a more precise estimate of theuncertain cleanup costs, the investor facesless risk; therefore, the investor's riskpremium falls and the investor's bid rises.This link generates four hypotheses regarding aprivatization agency's responses to theinvestor's knowledge of clean-up costs. Copyright Kluwer Academic Publishers 2004

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    File URL: http://hdl.handle.net/10.1023/B:EARE.0000035452.76736.51
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    Bibliographic Info

    Article provided by European Association of Environmental and Resource Economists in its journal Environmental and Resource Economics.

    Volume (Year): 29 (2004)
    Issue (Month): 1 (September)
    Pages: 97-122

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    Handle: RePEc:kap:enreec:v:29:y:2004:i:1:p:97-122

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    Web page: http://www.springerlink.com/link.asp?id=100263

    Related research

    Keywords: environmental contamination; liability; rivatization; risk;

    References

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    1. Tom H. Tietenberg, 1989. "Indivisible Toxic Torts: The Economics of Joint and Several Liability," Land Economics, University of Wisconsin Press, vol. 65(4), pages 305-319.
    2. Randall Bluffstone & Theodore Panayotou, 2000. "Environmental Liability and Privatization in Central and Eastern Europe: Toward an Optimal Policy," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 17(4), pages 335-352, December.
    3. Shavell, Steven, 1979. "On Moral Hazard and Insurance," The Quarterly Journal of Economics, MIT Press, vol. 93(4), pages 541-62, November.
    4. Rothschild, Michael & Stiglitz, Joseph E., 1971. "Increasing risk II: Its economic consequences," Journal of Economic Theory, Elsevier, vol. 3(1), pages 66-84, March.
    5. Farber, Stephen, 1991. "Regulatory schemes and self-protective environmental risk control: a comparison of insurance, liability, and deposit/refund systems," Ecological Economics, Elsevier, vol. 3(3), pages 231-245, September.
    6. Kathleen Segerson, 1994. "Property Transfers and Environmental Pollution: Incentive Effects of Alternative Policies," Land Economics, University of Wisconsin Press, vol. 70(3), pages 261-272.
    7. Segerson, Kathleen, 1989. "Risk and incentives in the financing of hazardous waste cleanup," Journal of Environmental Economics and Management, Elsevier, vol. 16(1), pages 1-8, January.
    8. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September.
    9. Sigman, Hilary, 1998. "Liability Funding and Superfund Clean-Up Remedies," Journal of Environmental Economics and Management, Elsevier, vol. 35(3), pages 205-224, May.
    10. Segerson Kathleen, 1993. "Liability Transfers: An Economic Assessment of Buyer and Lender Liability," Journal of Environmental Economics and Management, Elsevier, vol. 25(1), pages S46-S63, July.
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    Cited by:
    1. Shuichi Ohori, 2006. "Trade liberalization, consumption externalities and the environment: a mixed duopoly approach," Economics Bulletin, AccessEcon, vol. 17(5), pages 1-9.
    2. Satoru Komatsu & Andrey Kalugin & Shinji Kaneko, 2011. "Allocating Costs of Environmental Management among Generations: A Case of Environmental Liabilities in Transition Economies," IDEC DP2 Series 1-7, Hiroshima University, Graduate School for International Development and Cooperation (IDEC).
    3. Earnhart, Dietrich & Lizal, Lubomir, 2006. "Effects of ownership and financial performance on corporate environmental performance," Journal of Comparative Economics, Elsevier, vol. 34(1), pages 111-129, March.
    4. Bluffstone, Randall, 2007. "Privatization and contaminated site remediation in Central and Eastern Europe: Do environmental liability policies matter?," Ecological Economics, Elsevier, vol. 63(1), pages 31-41, June.
    5. repec:ebl:ecbull:v:17:y:2006:i:5:p:1-9 is not listed on IDEAS

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