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Environmental offsets and production externalities under monopolistic competition

Author

Listed:
  • Masatoshi Yoshida

    (University of Tsukuba
    Research Center for Urban Housing Sciences)

  • Stephen J. Turnbull

    (University of Tsukuba)

  • Mitsuru Ota

    (University of Tsukuba)

Abstract

In a monopolistically competitive model with production externalities, where individuals voluntarily provide offsets which compensate for degradation of environmental quality caused by their income earning activities, this paper examines how an increase in the population size affects the equilibrium levels of environmental quality, offsets, and net contributions. Whether labor supply is institutionally constrained or not, as the population size increases, environmental quality decreases and converges to zero. However, since offsets increase and converge to the degradation rate of environmental quality, the carbon neutrality theorem holds: net contributions are zero. These results are independent of the specification of the utility function.

Suggested Citation

  • Masatoshi Yoshida & Stephen J. Turnbull & Mitsuru Ota, 2023. "Environmental offsets and production externalities under monopolistic competition," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 30(2), pages 305-325, April.
    • Handle: RePEc:kap:itaxpf:v:30:y:2023:i:2:d:10.1007_s10797-021-09699-6
    DOI: 10.1007/s10797-021-09699-6
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    References listed on IDEAS

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    More about this item

    Keywords

    Environmental offset; Carbon neutrality; Voluntary contribution; Monopolistic competition;
    All these keywords.

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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