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Designing Economic Instruments For The Environment In A Decentralized Fiscal System

Author

Listed:
  • James Alm
  • H. Spencer Banzhaf

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 take the region, and the government, as a given; that is, this work has neglected important distinctions and interactions between the geographic scope of different pollutants, the enforcement authority of various levels of government, and the fiscal responsibilities of the various levels of government. 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 and to choose tax instruments that can both finance these expenditures and correct the market failures of externalities?
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • James Alm & H. Spencer Banzhaf, 2012. "Designing Economic Instruments For The Environment In A Decentralized Fiscal System," Journal of Economic Surveys, Wiley Blackwell, vol. 26(2), pages 177-202, April.
    • Handle: RePEc:bla:jecsur:v:26:y:2012:i:2:p:177-202
    DOI: j.1467-6419.2010.00632.x
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    Cited by:

    1. Merhatbeb Teklemedhn Gebregiorgs, 2018. "The Role of Public Interest Litigation in the Achievement of Sustainable Waste Management in Ethiopia," Sustainability, MDPI, vol. 10(12), pages 1-20, December.
    2. Shyam Nath & Yeti Nisha Madhoo, 2021. "Environmental fiscal federalism and atmospheric pollution: A tale of two Indian cities," ASARC Working Papers 2021-01, The Australian National University, Australia South Asia Research Centre.
    3. William M. Shobe & Dallas Burtraw, 2012. "Rethinking Environmental Federalism In A Warming World," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 3(04), pages 1-33.
    4. Sai Yuan & Xiongfeng Pan & Mengna Li, 2023. "The nonlinear influence of innovation efficiency on carbon and haze co-control: the threshold effect of environmental decentralization," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 25(12), pages 14283-14307, December.
    5. Caihua Zhou & Hualin Xie & Xinmin Zhang, 2019. "Does Fiscal Policy Promote Third-Party Environmental Pollution Control in China? An Evolutionary Game Theoretical Approach," Sustainability, MDPI, vol. 11(16), pages 1-18, August.
    6. Adel Shamaileh, 2016. "An Evaluation of the Effectiveness of Environment Policy in Jordan," International Journal of Business and Management, Canadian Center of Science and Education, vol. 11(2), pages 1-92, January.
    7. Millimet, Daniel L., 2013. "Environmental Federalism: A Survey of the Empirical Literature," IZA Discussion Papers 7831, IZA Network @ LISER.
    8. Fredriksson, Per G. & Wollscheid, Jim R., 2014. "Environmental decentralization and political centralization," Ecological Economics, Elsevier, vol. 107(C), pages 402-410.
    9. Laura Levaggi & Rosella Levaggi & Carmen Marchiori & Carmine Trecroci, 2020. "Waste-to-Energy in the EU: The Effects of Plant Ownership, Waste Mobility, and Decentralization on Environmental Outcomes and Welfare," Sustainability, MDPI, vol. 12(14), pages 1-12, July.
    10. Ian Hodge, 2019. "Renewing the Governance of Rural Land after Brexit: an Ecosystems Policy Approach," EuroChoices, The Agricultural Economics Society, vol. 18(2), pages 4-10, August.
    11. Zenglian Zhang & Wenju Zhao, 2018. "Research on Financial Pressure, Poverty Governance, and Environmental Pollution in China," Sustainability, MDPI, vol. 10(6), pages 1-24, June.
    12. Merhatbeb Teklemedhn Gebregiorgs, 2018. "Towards Sustainable Waste Management through Cautious Design of Environmental Taxes: The Case of Ethiopia," Sustainability, MDPI, vol. 10(9), pages 1-23, August.
    13. Jaime Vallés-Giménez & Anabel Zárate-Marco, 2013. "Environmental taxation and industrial water use in Spain," INVESTIGACIONES REGIONALES - Journal of REGIONAL RESEARCH, Asociación Española de Ciencia Regional, issue 25, pages 133-162.
    14. Alexeev, Alexander & Good, David H. & Krutilla, Kerry, 2016. "Environmental taxation and the double dividend in decentralized jurisdictions," Ecological Economics, Elsevier, vol. 122(C), pages 90-100.
    15. Christopher Costello & Daniel Kaffine, 2018. "Natural Resource Federalism: Preferences Versus Connectivity for Patchy Resources," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 71(1), pages 99-126, September.

    More about this item

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H4 - Public Economics - - Publicly Provided Goods
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

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