The Optimal Number of Polluters and Victims and the Inadequacy of Pigouvian Taxes
AbstractThe paper analyzes in a general equilibrium model the local and global pollution externality problems in which one firm pollutes and another firm in another industry suffer from pollution. Assuming that polluters and victims are located near each other (otherwise there is no local pollution problem) in identical cities, it is shown that there is in the local case always a corner solution with respect to the number of polluters, victims or both in a city, whereas in the global case, an interior solution always exits. The optimal pollution control instrument is a two-part Pigouvian tax-emissions rights scheme in which the firm pays emission taxes only for those emissions which exceed its emission rights.
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Bibliographic InfoPaper provided by Department of Economics in its series University of Helsinki, Department of Economics with number 468.
Length: 24 pages
Date of creation: 1999
Date of revision:
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Postal: University of Helsinki; Department of Economics, P.O.Box 54 (Unioninkatu 37) FIN-00014 Helsingin Yliopisto
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EXTERNALITIES ; TAXATION ; REGIONAL DEVELOPMENT;
Find related papers by JEL classification:
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
- Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
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