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Pollution Taxes for Monopolistically Competitive Firms

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Listed author(s):
  • Vetter Henrik

    ()

    (Statsbiblioteket - Denmark)

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    Abstract

    This paper examines ways of taxing monopolistically competitive firms that pollute the environment. There are two sources of welfare loss: production externalities and product selection bias associated with fixed costs. We argue that the optimal firm specific tax is always, strictly speaking, less than the Pigouvian tax and that furthermore, under some circumstances, both Pigouvian and optimal taxes leave the monopolistically competitive industry with too few firms. Under either regime, however, the tax targets the right firms.

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    File URL: https://www.degruyter.com/view/j/bejte.2005.5.1/bejte.2005.5.1.1202/bejte.2005.5.1.1202.xml?format=INT
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    Article provided by De Gruyter in its journal The B.E. Journal of Theoretical Economics.

    Volume (Year): 5 (2005)
    Issue (Month): 1 (May)
    Pages: 1-25

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    Handle: RePEc:bpj:bejtec:v:contributions.5:y:2005:i:1:n:2
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    1. Michael Spence, 1976. "Product Selection, Fixed Costs, and Monopolistic Competition," Review of Economic Studies, Oxford University Press, vol. 43(2), pages 217-235.
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    9. Dennis W. Carlton & Glenn C. Loury, 1980. "The Limitations of Pigouvian Taxes as a Long-Run Remedy for Externalities," The Quarterly Journal of Economics, Oxford University Press, vol. 95(3), pages 559-566.
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    12. Weitzman, Martin L, 1978. "Optimal Rewards for Economic Regulation," American Economic Review, American Economic Association, vol. 68(4), pages 683-691, September.
    13. Dennis W. Carlton & Glenn C. Loury, 1986. "The Limitation of Pigouvian Taxes as a Long-Run Remedy for Externalities: An Extension of Results," The Quarterly Journal of Economics, Oxford University Press, vol. 101(3), pages 631-634.
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