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Environmental regulation of urban informal manufacturing firms: In search of appropriate policies

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  • Majumder, Rajarshi
  • Mukherjee, Dipa

Abstract

The Urban Informal Sector (UIS) is a major and expanding part of developing economies both in terms of employment and output. However, they cause substantial environmental damages and worsen living conditions, prompting authorities to impose rigid environmental regulations. Yet, these steps have been mostly arbitrary and based on adhoc popular sentiment or political exigencies and not on rigorous econometric analysis. Positive gains from the UIS in terms of employment, supply of cheap commodities, and recycling wastes have to be carefully weighed before delegating them to the city-fringes or closing them down. In this paper, we try to model the reactions of the firms faced with a regulation regime and the consequent impact on both individual firms and social welfare to arrive at certain parametric guidelines regarding appropriateness of various polices. It emerges that policy regulations should follow empirical estimation of the parameters and not be based on normative generalisation.

Suggested Citation

  • Majumder, Rajarshi & Mukherjee, Dipa, 2016. "Environmental regulation of urban informal manufacturing firms: In search of appropriate policies," MPRA Paper 85027, University Library of Munich, Germany, revised 2017.
    • Handle: RePEc:pra:mprapa:85027
    as

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    File URL: https://mpra.ub.uni-muenchen.de/85027/1/MPRA_paper_85027.pdf
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    References listed on IDEAS

    as
    1. Kathuria, Vinish & Sterner, Thomas, 2002. "Monitoring and Enforcement: Is Two-Tier Regulation Robust?," Discussion Papers 10669, Resources for the Future.
    2. Baumol,William J. & Oates,Wallace E., 1988. "The Theory of Environmental Policy," Cambridge Books, Cambridge University Press, number 9780521322249.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Environmental degradation; Informal sector; Environmental regulation; Climate Change Mitigation; Firm Behaviour; Social Welfare;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D60 - Microeconomics - - Welfare Economics - - - General
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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