Environmental Regulation And The Optimal Location Of The Firm Under Uncertainty
AbstractThis paper examines the optimal location of a competitive firm in response to environmental costs imposed by the abatement investment and taxes when the cost of the environmental regulation varies spatially under uncertainty. It contributes to the literature by incorporating the spatial setting into a risk-averse firm's location decisions in the presence of environmental regulation uncertainty. An increase in the cost of the environmental regulation moves a risk-averse firm closer to the output market. An augmented input or emission tax causes the risk-averse firm to locate closer to the output market. Uncertainty about environmental regulations in the form of the abatement investment and taxes also leads a risk-averse firm to locate closer to the output market, while it does not affect a risk-neutral firm's location decisions. The results have implications for the design and implementations of environmental and other development-related policies.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2003 Annual meeting, July 27-30, Montreal, Canada with number 22066.
Date of creation: 2003
Date of revision:
Contact details of provider:
Postal: 555 East Wells Street, Suite 1100, Milwaukee, Wisconsin 53202
Phone: (414) 918-3190
Fax: (414) 276-3349
Web page: http://www.aaea.org
More information through EDIRC
risk aversion; uncertainty; regulation; market-based policies.; Environmental Economics and Policy; Risk and Uncertainty; D81; R38; Q28.;
Find related papers by JEL classification:
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy
- Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
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.:
- Diamond, Peter A. & Stiglitz, Joseph E., 1974. "Increases in risk and in risk aversion," Journal of Economic Theory, Elsevier, vol. 8(3), pages 337-360, July.
- Bommer, Rolf, 1999. "Environmental Policy and Industrial Competitiveness: The Pollution-Haven Hypothesis Reconsidered," Review of International Economics, Wiley Blackwell, vol. 7(2), pages 342-55, May.
- Batra, Raveendra N & Ullah, Aman, 1974. "Competitive Firm and the Theory of Input Demand under Price Uncertainty," Journal of Political Economy, University of Chicago Press, vol. 82(3), pages 537-48, May/June.
- Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September.
- Tim Jeppesen & John A. List & Henk Folmer, 2002. "Environmental Regulations and New Plant Location Decisions: Evidence from a Meta-Analysis," Journal of Regional Science, Wiley Blackwell, vol. 42(1), pages 19-49.
- Mathur, Vijay K., 1983. "Location theory of the firm under price uncertainty," Regional Science and Urban Economics, Elsevier, vol. 13(3), pages 411-428, August.
- Douglas M. Larson & Gloria E. Helfand & Brett W. House, 1996. "Second-Best Tax Policies to Reduce Nonpoint Source Pollution," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(4), pages 1108-1117.
- Martinich, Joseph S. & Hurter, Arthur Jr., 1982. "Price uncertainty and the optimal production-location decision," Regional Science and Urban Economics, Elsevier, vol. 12(4), pages 509-528, November.
- Murat Isik & Madhu Khanna, 2003. "Stochastic Technology, Risk Preferences, and Adoption of Site-Specific Technologies," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(2), pages 305-317.
- Song-ken Hsu & Lin-ti Tan, 2001. "Production location choice and risk aversion," The Annals of Regional Science, Springer, vol. 35(2), pages 239-248.
- Katz, Eliakim, 1984. "The optimal location of the competitive firm under price uncertainty," Journal of Urban Economics, Elsevier, vol. 16(1), pages 65-75, July.
- Bar-Shira, Z. & Just, R. E. & Zilberman, D., 1997. "Estimation of farmers' risk attitude: an econometric approach," Agricultural Economics, Blackwell, vol. 17(2-3), pages 211-222, December.
- Hoel, Michael, 1997. " Environmental Policy with Endogenous Plant Locations," Scandinavian Journal of Economics, Wiley Blackwell, vol. 99(2), pages 241-59, June.
- James R. Markusen, 1996.
"Costly Pollution Abatement, Competitiveness, and Plant Location Decisions,"
NBER Working Papers
5490, National Bureau of Economic Research, Inc.
- Markusen, James R., 1997. "Costly pollution abatement, competitiveness and plant location decisions," Resource and Energy Economics, Elsevier, vol. 19(4), pages 299-320, November.
- Murat Isik, 2002. "Resource Management under Production and Output Price Uncertainty: Implications for Environmental Policy," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(3), pages 557-571.
- Briys, Eric & Eeckhoudt, Louis, 1985. "Relative Risk Aversion in Comparative Statics: Comment," American Economic Review, American Economic Association, vol. 75(1), pages 281-83, March.
- Motta, Massimo & Thisse, Jacques-Francois, 1994. "Does environmental dumping lead to delocation?," European Economic Review, Elsevier, vol. 38(3-4), pages 563-576, April.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search).
If references are entirely missing, you can add them using this form.