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Strategic Investment by a Regulated Firm

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Author Info

  • Amihai Glazer

    ()

  • Eckhard Janeba

    ()

Abstract

A government's choice of regulatory stringency can depend on investments that a firm made in earlier periods. The regulated firm may therefore invest strategically, to effect the government's choice of regulation. To reduce its payment of emissions taxes, the firm may therefore reduce emissions below their socially optimal level. In contrast, a firm subject to regulation by quantity wants to reduce the stringency of regulations. A firm which invests little thereby reduces the marginal social cost of reducing emissions, and so can induce government to weaken its regulations.

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File URL: http://journals.kluweronline.com/issn/0927-5940/contents
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Bibliographic Info

Article provided by Springer in its journal International Tax and Public Finance.

Volume (Year): 11 (2004)
Issue (Month): 2 (03)
Pages: 123-132

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Handle: RePEc:kap:itaxpf:v:11:y:2004:i:2:p:123-132

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Web page: http://www.springerlink.com/link.asp?id=102915

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Cited by:
  1. Hattori, Keisuke, 2010. "Firm Incentives for Environmental R&D under Non-cooperative and Cooperative Policies," MPRA Paper 24754, University Library of Munich, Germany.
  2. Dijkstra, Bouwe R., 2007. "An investment contest to influence environmental policy," Resource and Energy Economics, Elsevier, vol. 29(4), pages 300-324, November.

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