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Second-best theory and the use of multiple policy instruments

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Author Info
Lori Bennear ()
Robert Stavins ()

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Abstract

In many cases policy makers employ multiple instruments to address a single environmental problem, but much of the economics literature on instrument choice focuses on comparing properties of single policy instruments. We argue that under a fairly broad set of circumstances the use of multiple policy instruments can be justified as optimal in a second-best world. We examine two broad categories of second-best policy making: cases with multiple market failures only some of which can be corrected at any one time; and cases with exogenous (often political) constraints that cannot be removed. The fact that the use of multiple policy instruments can be justified economically in these two cases does not imply, however, that all multiple instruments employed in actual practice are economically justified. Copyright Springer Science+Business Media, Inc. 2007

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File URL: http://hdl.handle.net/10.1007/s10640-007-9110-y
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Article provided by European Association of Environmental and Resource Economists in its journal Environmental and Resource Economics.

Volume (Year): 37 (2007)
Issue (Month): 1 (May)
Pages: 111-129
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Handle: RePEc:kap:enreec:v:37:y:2007:i:1:p:111-129

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Christoph Böhringer and Knut Einar Rosendahl, 2009. "Green Serves the Dirtiest. On the Interaction between Black and Green Quotas," Discussion Papers 581, Research Department of Statistics Norway. [Downloadable!]
  2. Thomas Eichner & Rüdiger Pethig, 2009. "Efficient management of insecure fossil fuel imports through taxing (!) domestic green energy?," Volkswirtschaftliche Diskussionsbeitraege 138-09, Universität Siegen, Fachbereich Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht. [Downloadable!]
  3. Parry, Ian W.H. & Goulder, Lawrence H., 2008. "Instrument Choice in Environmental Policy," Discussion Papers dp-08-07, Resources For the Future. [Downloadable!]
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