We study the optimal emission standards under uncertain pollution damages and transaction costs associated with policy changes in a dynamic setting. We consider three alternative forms of transactions costs and show that they can lead to different kinds of delays of policy changes or smaller scales of these changes. Thus, policy persistence can be a rational response of forward-looking policy makers to future transaction costs, rather than an inefficient outcome of the current political process.
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Publisher Info
Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number
11444.
Length: Date of creation: 25 Feb 2004 Date of revision: Publication status: Published in Resource and Energy Economics, 2003, Vol. 25, pp. 255-68. Handle: RePEc:isu:genres:11444
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