How Does Uncertainty Over Future Environmental Policy Affect Investment Decisions in Transition Economies?
AbstractA 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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Bibliographic InfoPaper provided by Harvard - Institute for International Development in its series Papers with number 623.
Length: 41 pages
Date of creation: 1998
Date of revision:
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Postal: CAER Project, Harvard Institute for International Development, 14 Story Street, Cambridge MA 02138O
Web page: http://www.hiid.harvard.edu/
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Find related papers by JEL classification:
- Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
- Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- D92 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Firm Choice and Growth, Financing, Investment, and Capacity
- E22 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
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