On the Superiority of Corrective Taxes to Quantity Regulation
AbstractThe traditional view of economists has been that corrective taxes are superior to direct regulation of harmful externalities when the state's information about control costs is incomplete. In recent years, however, many economists seem to have adopted a different view--that either corrective taxes or quantity regulation could be superior to the other. We emphasize that one argument for this newer view, identified with Weitzman (1974), holds only if the state is constrained to use a fixed tax rate (a linear tax schedule) even when harm is nonlinear. But if--as seems more plausible--the state can impose a nonlinear tax equal to the schedule of harm or can adjust the tax rate upon learning that it diverges from marginal harm, then corrective taxes are superior to quantity regulation. Another argument favoring quantity regulation is that it gains appeal when the state is uncertain about the harm caused by an externality. In this case, however, a corrective tax schedule (equal to the expected harm schedule) is superior to quantity regulation. Copyright 2002, Oxford University Press.
Download InfoTo our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Bibliographic InfoArticle provided by Oxford University Press in its journal American Law and Economics Review.
Volume (Year): 4 (2002)
Issue (Month): 1 (January)
Contact details of provider:
Postal: Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK
Fax: 01865 267 985
Web page: http://www.aler.oupjournals.org/
Other versions of this item:
- Louis Kaplow & Steven Shavell, 1997. "On the Superiority of Corrective Taxes to Quantity Regulation," NBER Working Papers 6251, National Bureau of Economic Research, Inc.
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- D62 - Microeconomics - - Welfare Economics - - - Externalities
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.:
- Butler, Richard V & Maher, Michael D, 1982. "The Control of Externalities in a Growing Urban Economy," Economic Inquiry, Western Economic Association International, vol. 20(1), pages 155-63, January.
- Baumol,William J. & Oates,Wallace E., 1988. "The Theory of Environmental Policy," Cambridge Books, Cambridge University Press, number 9780521322249, November.
- Karp, Gordon & Yohe, Gary W., 1979. "The optimal linear alternative to price and quantity controls in the multifirm case," Journal of Comparative Economics, Elsevier, vol. 3(1), pages 56-65, March.
- Baumol,William J. & Oates,Wallace E., 1988. "The Theory of Environmental Policy," Cambridge Books, Cambridge University Press, number 9780521311120, November.
- Kwerel, Evan, 1977. "To Tell the Truth: Imperfect Information and Optimal Pollution Control," Review of Economic Studies, Wiley Blackwell, vol. 44(3), pages 595-601, October.
- Laffont, J.J. & Tirole, J., 1995.
"Pollution Permits and Environmental Innovation,"
95.396, Toulouse - GREMAQ.
- Myles,Gareth D., 1995. "Public Economics," Cambridge Books, Cambridge University Press, number 9780521497695, November.
- Roberts, Marc J. & Spence, Michael, 1976. "Effluent charges and licenses under uncertainty," Journal of Public Economics, Elsevier, vol. 5(3-4), pages 193-208.
- Morgan, Peter J., 1983. "Alternative policy instruments under uncertainty: A programming model of toxic pollution control," Journal of Environmental Economics and Management, Elsevier, vol. 10(3), pages 248-269, September.
- Robert A. Collinge & Wallace E. Oates, 1982. "Efficiency in Pollution Control in the Short and Long Runs: A System of Rental Emission Permits," Canadian Journal of Economics, Canadian Economics Association, vol. 15(2), pages 347-54, May.
- Stavins, Robert & Keohane, Nathaniel & Revesz, Richard, 1997. "The Positive Political Economy of Instrument Choice in Environmental Policy," Discussion Papers dp-97-25, Resources For the Future.
- Adar, Zvi & Griffin, James M., 1976. "Uncertainty and the choice of pollution control instruments," Journal of Environmental Economics and Management, Elsevier, vol. 3(3), pages 178-188, October.
- Dasgupta, Partha & Hammond, Peter & Maskin, Eric, 1980. "On Imperfect Information and Optimal Pollution Control," Review of Economic Studies, Wiley Blackwell, vol. 47(5), pages 857-60, October.
- Fishelson, Gideon, 1976. "Emission control policies under uncertainty," Journal of Environmental Economics and Management, Elsevier, vol. 3(3), pages 189-197, October.
- M. L. Weitzman, 1973.
"Prices vs. Quantities,"
106, Massachusetts Institute of Technology (MIT), Department of Economics.
- Weitzman, Martin L, 1978. "Optimal Rewards for Economic Regulation," American Economic Review, American Economic Association, vol. 68(4), pages 683-91, September.
- Cropper, Maureen L & Oates, Wallace E, 1992. "Environmental Economics: A Survey," Journal of Economic Literature, American Economic Association, vol. 30(2), pages 675-740, June.
- Mendelsohn, Robert, 1984. "Endogenous technical change and environmental regulation," Journal of Environmental Economics and Management, Elsevier, vol. 11(3), pages 202-207, September.
- Bohm, Peter & Russell, Clifford S., 1985. "Comparative analysis of alternative policy instruments," Handbook of Natural Resource and Energy Economics, in: A. V. Kneese† & J. L. Sweeney (ed.), Handbook of Natural Resource and Energy Economics, edition 1, volume 1, chapter 10, pages 395-460 Elsevier.
- Susan Rose-Ackerman, 1973. "Effluent Charges: A Critique," Canadian Journal of Economics, Canadian Economics Association, vol. 6(4), pages 512-28, November.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press) or (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.