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Pollution Taxes for Monopolistically Competitive Firms

Listed author(s):
  • Vetter Henrik

    ()

    (Statsbiblioteket - Denmark)

Registered author(s):

    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. Benassy, Jean-Pascal, 1996. "Taste for variety and optimum production patterns in monopolistic competition," Economics Letters, Elsevier, vol. 52(1), pages 41-47, July.
    2. Verhoef, Erik T. & Nijkamp, Peter, 1999. "Second-best energy policies for heterogeneous firms," Energy Economics, Elsevier, vol. 21(2), pages 111-134, April.
    3. Katsoulacos, Yannis & Xepapadeas, Anastasios, 1994. "Environmental Policy Under Oligopoly with Endogenous Market Structure," CEPR Discussion Papers 955, C.E.P.R. Discussion Papers.
    4. Roberts, Marc J. & Spence, Michael, 1976. "Effluent charges and licenses under uncertainty," Journal of Public Economics, Elsevier, vol. 5(3-4), pages 193-208.
    5. 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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    7. Lee, Dwight R., 1975. "Efficiency of pollution taxation and market structure," Journal of Environmental Economics and Management, Elsevier, vol. 2(1), pages 69-72, September.
    8. 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.
    9. Barnett, A H, 1980. "The Pigouvian Tax Rule under Monopoly," American Economic Review, American Economic Association, vol. 70(5), pages 1037-1041, December.
    10. Fredrik Carlsson, 2000. "Environmental Taxation and Strategic Commitment in Duopoly Models," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 15(3), pages 243-256, March.
    11. T. H. Tietenberg, 1978. "Spatially Differentiated Air Pollutant Emission Charges: An Economic and Legal Analysis," Land Economics, University of Wisconsin Press, vol. 54(3), pages 265-277.
    12. Dixit, Avinash K & Stiglitz, Joseph E, 1975. "Monopolistic Competition and Optimum Product Diversity," The Warwick Economics Research Paper Series (TWERPS) 64, University of Warwick, Department of Economics.
    13. Louis Kaplow & Steven Shavell, 1997. "On the Superiority of Corrective Taxes to Quantity Regulation," NBER Working Papers 6251, National Bureau of Economic Research, Inc.
    14. Tietenberg, T. H., 1974. "Derived decision rules for pollution control in a general equilibrium space economy," Journal of Environmental Economics and Management, Elsevier, vol. 1(1), pages 3-16, May.
    15. Buchanan, James M, 1969. "External Diseconomies, Corrective Taxes, and Market Structure," American Economic Review, American Economic Association, vol. 59(1), pages 174-177, March.
    16. Weitzman, Martin L, 1978. "Optimal Rewards for Economic Regulation," American Economic Review, American Economic Association, vol. 68(4), pages 683-691, September.
    17. 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.
    18. Lee, Sang-Ho, 1999. "Optimal Taxation for Polluting Oligopolists with Endogenous Market Structure," Journal of Regulatory Economics, Springer, vol. 15(3), pages 293-308, May.
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