A firm-level sequential investment model is developed to analyze how uncertainty about environmental policies in the future affects current investment decisions. Three specific policies are considered -- a pollution tax, an investment credit in the presence of liquidity constraints, and a pollution standard. Using a location-scale framework for expectations, the analysis shows how expectations about the future policy (i.e. the mean and variance of the future tax, credit, or standard) affect current investment decisions.
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Paper provided by Harvard - Institute for International Development in its series Papers with number
623.
Length: 41 pages Date of creation: 1998 Date of revision: Handle: RePEc:fth:harvid:623
Contact details of provider: Postal: CAER Project, Harvard Institute for International Development, 14 Story Street, Cambridge MA 02138O Phone: (617)495-2161 Fax: (617)495-0527 Email: Web page: http://www.hiid.harvard.edu/ More information through EDIRC
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