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Intra-Industry Reallocations and Long-run Impacts of Environmental Regulations

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  • Yoshifumi Konishi

    ()
    (Faculty of Liberal Arts, Sophia University)

  • Nori Tarui

    ()
    (Department of Economics, University of Hawaii at Manoa)

Abstract

We investigate the long-run impact of environmental regulations on the intra-industry distribution of firm-level productivity and the resulting aggregate variables. In a general-equilibrium model that accounts for endogenous entry/exit of heterogeneous firms, neither the average productivity of firms nor the mass of firms is independent of the choice of policy instruments (i.e. emissions tax vs. emissions trading) or permit allocation rules. The equilibrium price of permits under emissions trading is lower than the emissions tax rate that would support the same aggregate emissions. An incomplete emissions market results in a net increase in combined aggregate emissions.

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File URL: http://www.economics.hawaii.edu/research/workingpapers/WP_13-7.pdf
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Bibliographic Info

Paper provided by University of Hawaii at Manoa, Department of Economics in its series Working Papers with number 201307.

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Length: 36 pages
Date of creation: May 2013
Date of revision:
Handle: RePEc:hai:wpaper:201307

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Related research

Keywords: Emissions Tax; Emissions Trading; Heterogeneous Firms; Endogenous Entry/Exit; Melitz Model; Incomplete Regulation; Emissions Leakage;

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  17. Pezzey, John C.V., 2003. "Emission Taxes and Tradable Permits: A Comparison of Views on Long Run Efficiency," 2003 Conference (47th), February 12-14, 2003, Fremantle, Australia 58198, Australian Agricultural and Resource Economics Society.
  18. Cole, Matthew A. & Elliott, Robert J.R. & Shimamoto, Kenichi, 2005. "Industrial characteristics, environmental regulations and air pollution: an analysis of the UK manufacturing sector," Journal of Environmental Economics and Management, Elsevier, vol. 50(1), pages 121-143, July.
  19. Hahn, Robert W., 1982. "Market Power and Transferable Property Rights," Working Papers 402, California Institute of Technology, Division of the Humanities and Social Sciences.
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