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Standards, taxes and social welfare

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  • Adriana Gama

    (El Colegio de México)

Abstract

This paper ranks three widely used instruments to fight pollution under imperfect competition. We consider n symmetric and polluting firms that compete in quantity, have access to an exogenous cleaning technology and are subject to environmental regulation by means of either emission standards, performance standards or taxes. The environmental authority optimally chooses the instrument by maximizing social welfare. By solving the one- and the two-stage games, for exogenous and endogenous instruments respectively, we conclude that the standards dominate in terms of optimizing social welfare. In particular, the performance standard is the preferred instrument, while the tax is the least desirable policy for the regulator.

Suggested Citation

  • Adriana Gama, 2017. "Standards, taxes and social welfare," Serie documentos de trabajo del Centro de Estudios Económicos 2017-04, El Colegio de México, Centro de Estudios Económicos.
    • Handle: RePEc:emx:ceedoc:2017-04
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    File URL: https://cee.colmex.mx/dts/2017/DT-2017-4.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    environmental regulation; abatement cost; emission standard; performance standard; Pigouvian tax;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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