A Whiter Shade of Pale: A Whiter Shade of Pale: On the Political Economy of Regulatory Instruments
AbstractWe consider an intertemporal policy game between changing governments that differ in their attitudes towards a particular feature of market outcomes, exemplified with environmental pollution. When in power, a government will choose policy instruments and set strictness of regulation with a view to influencing the policy of future, possibly different, governments. We demonstrate that a "brown" government favours emission quotas over effluent taxes, as quotas establish property rights that are costly to reverse. Conversely, a "green" government prefers to regulate by taxes, in order to limit the incentives of future brown governments to ease regulations. Strategic behaviour tends to exaggerate policy differences (making green governments greener and brown governments browner) compared to when such strategic considerations were not an issue. (JEL: D81, D9, H23, L51, Q28, Q38) (c) 2007 by the European Economic Association.
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Bibliographic InfoArticle provided by MIT Press in its journal Journal of the European Economic Association.
Volume (Year): 5 (2007)
Issue (Month): 1 (03)
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Find related papers by JEL classification:
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- D9 - Microeconomics - - Intertemporal Choice
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
- Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)
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- Baldursson, Fridrik M. & von der Fehr, Nils-Henrik M., 2008. "Prices vs. quantities: Public finance and the choice of regulatory instruments," European Economic Review, Elsevier, vol. 52(7), pages 1242-1255, October.
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