Advanced Search
MyIDEAS: Login to save this paper or follow this series

Designing economic instruments for the environment in a decentralized fiscal system

Contents:

Author Info

  • Alm, James
  • Banzhaf, H. Spencer

Abstract

When external effects are important, markets will be inefficient, and economists have considered several broad classes of economic instruments to correct these inefficiencies. However, the standard economic analysis has tended to neglect important distinctions and interactions between the geographic scope of pollutants, the enforcement authority of various levels of government, and the fiscal responsibilities of the levels of government. For example, externalities generated in a particular local area may be confined to the local area or may spill over to other jurisdictions. Also, local governments may be well informed about how best to regulate or enforce pollution control within their jurisdiction, but they may not consider the effects of their actions on other jurisdictions. Finally, the existence of locally-generated waste emissions affects the appropriate assignment of both expenditure and tax responsibilities among levels of government. The standard analysis therefore focuses mainly upon an aggregate (or national) perspective, it typically ignores the possibility that the externality may be created and addressed by local governments, and it does not consider the implications of decentralization for the design of economic instruments targeted at environmental problems. This paper examines the implications of decentralization for the design of corrective policies; that is, how does one design economic instruments in a decentralized fiscal system in which externalities exist at the local level and in which subnational governments have the power to provide local public services, as well as to choose tax instruments that can both finance these expenditures and correct the market failures of externalities?

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www-wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/2007/10/24/000158349_20071024084328/Rendered/PDF/wps4379.pdf
Download Restriction: no

Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 4379.

as in new window
Length:
Date of creation: 01 Oct 2007
Date of revision:
Handle: RePEc:wbk:wbrwps:4379

Contact details of provider:
Postal: 1818 H Street, N.W., Washington, DC 20433
Phone: (202) 477-1234
Email:
Web page: http://www.worldbank.org/
More information through EDIRC

Related research

Keywords: Environmental Economics&Policies; Debt Markets; Taxation&Subsidies; Public Sector Economics&Finance; Emerging Markets;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Cropper, Maureen L & Oates, Wallace E, 1992. "Environmental Economics: A Survey," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 30(2), pages 675-740, June.
  2. Bergstrom, Theodore C., 1976. "Regulation of externalities," Journal of Public Economics, Elsevier, Elsevier, vol. 5(1-2), pages 131-138.
  3. James Alm, 1983. "The Optimal Structure of Intergovernmental Grants," Public Finance Review, , , vol. 11(4), pages 387-417, October.
  4. Wayne B. Gray & Ronald J. Shadbegian, 2002. "Optimal Pollution Abatement - Whose Benefits Matter, and How Much?," NBER Working Papers 9125, National Bureau of Economic Research, Inc.
  5. Fox, William F. & Murray, Matthew N., 1997. "The Sales Tax and Electronic Commerce: So What's New?," National Tax Journal, National Tax Association, vol. 50(3), pages 573-92, September.
  6. Bostedt, Göran & Bostedt, Göran, 2003. "Review - Thomas Sterner (2003): Policy Instruments for Environmental and Natural Resource Management," Journal of Forest Economics, Elsevier, Elsevier, vol. 9(1), pages 65-66.
  7. Hilary Sigman, 2004. "Transboundary Spillovers and Decentralization of Environmental Policies," Departmental Working Papers, Rutgers University, Department of Economics 200416, Rutgers University, Department of Economics.
  8. Bartelsman, Eric J & Beetsma, Roel, 2000. "Why Pay More? Corporate Tax Avoidance Through Transfer Pricing in OECD Countries," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2543, C.E.P.R. Discussion Papers.
  9. Jeremy Edwards & Michael Keen, 1994. "Tax competition and Leviathon," IFS Working Papers, Institute for Fiscal Studies W94/07, Institute for Fiscal Studies.
  10. John A. List & Shelby Gerking, 2000. "Regulatory Federalism and Environmental Protection in the United States," Journal of Regional Science, Wiley Blackwell, Wiley Blackwell, vol. 40(3), pages 453-471.
  11. Ellerman,A. Denny & Joskow,Paul L. & Schmalensee,Richard & Montero,Juan-Pablo & Bailey,Elizabeth M., 2005. "Markets for Clean Air," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521023894.
  12. Hilary Sigman, 2003. "Letting States do the Dirty Work: State Responsibility for Federal Environmental Regulation," NBER Working Papers 9451, National Bureau of Economic Research, Inc.
  13. Hahn, Robert W., 1990. "Regulatory constraints on environmental markets," Journal of Public Economics, Elsevier, Elsevier, vol. 42(2), pages 149-175, July.
  14. Kruger, Joseph & Oates, Wallace E. & Pizer, William A., 2007. "Decentralization in the EU Emissions Trading Scheme and Lessons for Global Policy," Discussion Papers, Resources For the Future dp-07-02, Resources For the Future.
  15. Kwerel, Evan, 1977. "To Tell the Truth: Imperfect Information and Optimal Pollution Control," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 44(3), pages 595-601, October.
  16. Maria Garcia-Valiñas, 2007. "What level of decentralization is better in an environmental context? An application to water policies," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 38(2), pages 213-229, October.
  17. Hilary Sigman, 2002. "International Spillovers and Water Quality in Rivers: Do Countries Free Ride?," American Economic Review, American Economic Association, American Economic Association, vol. 92(4), pages 1152-1159, September.
  18. Zodrow, George R. & Mieszkowski, Peter, 1986. "Pigou, Tiebout, property taxation, and the underprovision of local public goods," Journal of Urban Economics, Elsevier, vol. 19(3), pages 356-370, May.
  19. Bovenberg, A Lans & Goulder, Lawrence H, 1996. "Optimal Environmental Taxation in the Presence of Other Taxes: General-Equilibrium Analyses," American Economic Review, American Economic Association, American Economic Association, vol. 86(4), pages 985-1000, September.
  20. Bovenberg, A.L. & Mooij, R.A. de, 1994. "Environmental levies and distortionary taxation," Open Access publications from Tilburg University, Tilburg University urn:nbn:nl:ui:12-152985, Tilburg University.
  21. Wallace E. Oates, 1999. "An Essay on Fiscal Federalism," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 37(3), pages 1120-1149, September.
  22. Hahn, Robert W, 1989. "Economic Prescriptions for Environmental Problems: How the Patient Followed the Doctor's Orders," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 3(2), pages 95-114, Spring.
  23. Baumol,William J. & Oates,Wallace E., 1988. "The Theory of Environmental Policy," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521311120.
  24. Hikaru Ogawa & David Wildasin, 2007. "Think Locally, Act Locally: Spillovers, Spillbacks, and Efficient Decentralized Policymaking," Working Papers, University of Kentucky, Institute for Federalism and Intergovernmental Relations 2007-06, University of Kentucky, Institute for Federalism and Intergovernmental Relations.
  25. Galeotti, Gianluigi & Breton, Albert, 1986. "An Economic Theory of Political Parties," Kyklos, Wiley Blackwell, Wiley Blackwell, vol. 39(1), pages 47-65.
  26. Gordon, Roger H, 1983. "An Optimal Taxation Approach to Fiscal Federalism," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 98(4), pages 567-86, November.
  27. Don Fullerton & Thomas C. Kinnaman, 1994. "Household Responses to Pricing Garbage by the Bag," CARE Working Papers, The University of Texas at Austin, Center for Applied Research in Economics 9402, The University of Texas at Austin, Center for Applied Research in Economics.
  28. Wilson, John D., 1986. "A theory of interregional tax competition," Journal of Urban Economics, Elsevier, vol. 19(3), pages 296-315, May.
  29. Carlson, Curtis & Burtraw, Dallas & Cropper, Maureen & Palmer, Karen L., 1998. "Sulfur dioxide control by electric utilities : what are the gains from trade?," Policy Research Working Paper Series, The World Bank 1966, The World Bank.
  30. Parry, Ian, 2004. "Fiscal Interactions and the Costs of Controlling Pollution from Electricity," Discussion Papers, Resources For the Future dp-04-27, Resources For the Future.
  31. John Douglas Wilson & Roger H. Gordon, 2003. "Expenditure Competition," Journal of Public Economic Theory, Association for Public Economic Theory, Association for Public Economic Theory, vol. 5(2), pages 399-417, 04.
  32. Nagase, Yoko & Silva, Emilson C. D., 2000. "Optimal Control of Acid Rain in a Federation with Decentralized Leadership and Information," Journal of Environmental Economics and Management, Elsevier, vol. 40(2), pages 164-180, September.
  33. Kritikos, Alexander S., 2004. "A penalty system to enforce policy measures under incomplete information," International Review of Law and Economics, Elsevier, Elsevier, vol. 24(3), pages 385-403, September.
  34. Grubert, Harry, 1998. "Taxes and the division of foreign operating income among royalties, interest, dividends and retained earnings," Journal of Public Economics, Elsevier, Elsevier, vol. 68(2), pages 269-290, May.
  35. Wildasin, David E., 2003. "Fiscal competition in space and time," Journal of Public Economics, Elsevier, Elsevier, vol. 87(11), pages 2571-2588, October.
  36. Harry Huizinga & Gaetan Nicodeme, 2003. "Foreign Ownership and Corporate Income Taxation: An Empirical Evaluation," Public Economics, EconWPA 0310005, EconWPA.
  37. Fredriksson, Per G. & Millimet, Daniel L., 2002. "Strategic Interaction and the Determination of Environmental Policy across U.S. States," Journal of Urban Economics, Elsevier, vol. 51(1), pages 101-122, January.
  38. Baumol,William J. & Oates,Wallace E., 1988. "The Theory of Environmental Policy," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521322249.
  39. Rauscher, Michael, 1998. "Leviathan and Competition among Jurisdictions: The Case of Benefit Taxation," Journal of Urban Economics, Elsevier, vol. 44(1), pages 59-67, July.
  40. Arik Levinson, 2002. "Environmental Regulatory Competition: A Status Report and Some New Evident," Working Papers, Georgetown University, Department of Economics gueconwpa~02-02-07, Georgetown University, Department of Economics.
  41. Robert N. Stavins, 1998. "What Can We Learn from the Grand Policy Experiment? Lessons from SO2 Allowance Trading," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 12(3), pages 69-88, Summer.
  42. Thomas A. Barthold, 1994. "Issues in the Design of Environmental Excise Taxes," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 8(1), pages 133-151, Winter.
  43. Hines, James R. Jr., 1999. "Lessons from Behavioral Responses to International Taxation," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 305-22, June.
  44. Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 269-304, June.
  45. Daniel L. Millimet, 2003. "Assessing the Empirical Impact of Environmental Federalism," Journal of Regional Science, Wiley Blackwell, Wiley Blackwell, vol. 43(4), pages 711-733.
  46. Jack M. Mintz, 1992. "Is There a Future for Capital Income Taxation?," OECD Economics Department Working Papers 108, OECD Publishing.
  47. Kunce, Mitch & Shogren, Jason F., 2005. "On interjurisdictional competition and environmental federalism," Journal of Environmental Economics and Management, Elsevier, vol. 50(1), pages 212-224, July.
  48. Silva, Emilson C. D. & Caplan, Arthur J., 1997. "Transboundary Pollution Control in Federal Systems," Journal of Environmental Economics and Management, Elsevier, vol. 34(2), pages 173-186, October.
  49. Wilson, John Douglas & Wildasin, David E., 2004. "Capital tax competition: bane or boon," Journal of Public Economics, Elsevier, Elsevier, vol. 88(6), pages 1065-1091, June.
  50. Clausing, Kimberly A., 2003. "Tax-motivated transfer pricing and US intrafirm trade prices," Journal of Public Economics, Elsevier, Elsevier, vol. 87(9-10), pages 2207-2223, September.
  51. Richard M. Bird & Robert D. Ebel, 2005. "Subsidiarity, Solidarity, and Asymmetry," International Tax Program Papers, International Tax Program, Institute for International Business, Joseph L. Rotman School of Management, University of Toronto 0509, International Tax Program, Institute for International Business, Joseph L. Rotman School of Management, University of Toronto.
  52. Wildasin, David E., 1989. "Interjurisdictional capital mobility: Fiscal externality and a corrective subsidy," Journal of Urban Economics, Elsevier, vol. 25(2), pages 193-212, March.
  53. James R. Markusen & Edward R. Morey & Nancy Olewiler, 1992. "Noncooperative Equilibria in Regional Environmental Policies When Plant Locations are Endogenous," NBER Working Papers 4051, National Bureau of Economic Research, Inc.
  54. Don Fullerton & Sarah West, 1999. "Can Taxes on Cars and on Gasoline Mimic an Unavailable Tax on Emissions?," NBER Working Papers 7059, National Bureau of Economic Research, Inc.
  55. Juan-Pablo Montero, 2004. "Pollution markets with imperfectly observed emissions," Working Papers, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research 0414, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
  56. Don Fullerton & Thomas C. Kinnaman, 1993. "Garbage, Recycling, and Illicit Burning or Dumping," NBER Working Papers 4374, National Bureau of Economic Research, Inc.
  57. Oates, Wallace E. & Portney, Paul R., 2003. "The political economy of environmental policy," Handbook of Environmental Economics, Elsevier, in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 1, chapter 8, pages 325-354 Elsevier.
  58. Kornai, J, 1979. "Resource-Constrained versus Demand-Constrained Systems," Econometrica, Econometric Society, Econometric Society, vol. 47(4), pages 801-19, July.
  59. Hilary Sigman, 2007. "Decentralization and Environmental Quality: An International Analysis of Water Pollution," NBER Working Papers 13098, National Bureau of Economic Research, Inc.
  60. Wellisch Dietmar, 1995. "Locational Choices of Firms and Decentralized Environmental Policy with Various Instruments," Journal of Urban Economics, Elsevier, vol. 37(3), pages 290-310, May.
  61. Michael J. Keen & Christos Kotsogiannis, 2002. "Tax competition in federations and the welfare consequences of decentralization," Discussion Papers, Exeter University, Department of Economics 0201, Exeter University, Department of Economics.
  62. Hazilla, Michael & Kopp, Raymond J, 1990. "Social Cost of Environmental Quality Regulations: A General Equilibrium Analysis," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 98(4), pages 853-73, August.
  63. Oates, Wallace E. & Schwab, Robert M., 1988. "Economic competition among jurisdictions: efficiency enhancing or distortion inducing?," Journal of Public Economics, Elsevier, Elsevier, vol. 35(3), pages 333-354, April.
  64. Baumol, William J, 1972. "On Taxation and the Control of Externalities," American Economic Review, American Economic Association, American Economic Association, vol. 62(3), pages 307-22, June.
  65. Helland, Eric & Whitford, Andrew B., 2003. "Pollution incidence and political jurisdiction: evidence from the TRI," Journal of Environmental Economics and Management, Elsevier, vol. 46(3), pages 403-424, November.
  66. H. Spencer Banzhaf & B. Andrew Chupp, 2010. "Heterogeneous Harm vs. Spatial Spillovers: Environmental Federalism and US Air Pollution," NBER Working Papers 15666, National Bureau of Economic Research, Inc.
  67. Swenson, Deborah L., 2001. "Tax Reforms and Evidence of Transfer Pricing," National Tax Journal, National Tax Association, vol. 54(n. 1), pages 7-26, March.
  68. Cornes,Richard & Sandler,Todd, 1996. "The Theory of Externalities, Public Goods, and Club Goods," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521477185.
  69. Eric Helland & Andrew B. Whitford, . "Pollution Incidence and Political Jurisdiction: Evidence from the TRI," Claremont Colleges Working Papers, Claremont Colleges 2002-28, Claremont Colleges.
  70. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 64, pages 416.
  71. Segerson, Kathleen, 1988. "Uncertainty and incentives for nonpoint pollution control," Journal of Environmental Economics and Management, Elsevier, vol. 15(1), pages 87-98, March.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Shobe, William M. & Burtraw, Dallas, 2012. "Rethinking Environmental Federalism in a Warming World," Discussion Papers, Resources For the Future dp-12-04, Resources For the Future.
  2. Vallés-Giménez, Jaime & Zárate-Marco , Anabel, 2013. "Environmental taxation and industrial water use in Spain," Investigaciones Regionales, Asociación Española de Ciencia Regional, Asociación Española de Ciencia Regional, issue 25, pages 133-162.
  3. Millimet, Daniel L., 2013. "Environmental Federalism: A Survey of the Empirical Literature," IZA Discussion Papers 7831, Institute for the Study of Labor (IZA).

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:4379. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.