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Managing correlated stock externalities: water taxes with a pinch of salt


This paper addresses the design of corrective taxation schemes to manage multiple, interacting stocks. In the setting of irrigation-induced salinity, a collective groundwater stock aliments a set of individual rootzone salt stocks. It is shown that the policy maker does not need to base the tax rule on the individual salt stocks. Indeed, taxes based on the level of input and on the collective stock induce the agents to achieve the socially optimal irrigation path. An even simpler instrument is sufficient if the policy-maker's goal is to reach optimality at the steady state only.

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Article provided by Cambridge University Press in its journal Environment and Development Economics.

Volume (Year): 15 (2010)
Issue (Month): 03 (June)
Pages: 275-292

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Handle: RePEc:cup:endeec:v:15:y:2010:i:03:p:275-292_00
Contact details of provider: Postal: Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK
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  1. Karp, Larry & Livernois, John, 1992. "On efficiency-inducing taxation for a non-renewable resource monopolist," Journal of Public Economics, Elsevier, vol. 49(2), pages 219-239, November.
  2. Moslener, Ulf & Requate, Till, 2007. "Optimal abatement in dynamic multi-pollutant problems when pollutants can be complements or substitutes," Journal of Economic Dynamics and Control, Elsevier, vol. 31(7), pages 2293-2316, July.
  3. Horan, Richard D. & Shortle, James S. & Abler, David G., 1998. "Ambient Taxes When Polluters Have Multiple Choices," Journal of Environmental Economics and Management, Elsevier, vol. 36(2), pages 186-199, September.
  4. Wichelns, Dennis, 1999. "An economic model of waterlogging and salinization in arid regions," Ecological Economics, Elsevier, vol. 30(3), pages 475-491, September.
  5. Ragozin, David L. & Brown, Gardner Jr., 1985. "Harvest policies and nonmarket valuation in a predator -- prey system," Journal of Environmental Economics and Management, Elsevier, vol. 12(2), pages 155-168, June.
  6. Arthur Caplan & Emilson Silva, 2002. "An Efficient Mechanism to Control Correlated Externalities: Redistributive Transfers and the Coexistence of Regional and Global Pollution Permit Markets," Working Papers 2002-23, Utah State University, Department of Economics.
  7. Dockner,Engelbert J. & Jorgensen,Steffen & Long,Ngo Van & Sorger,Gerhard, 2000. "Differential Games in Economics and Management Science," Cambridge Books, Cambridge University Press, number 9780521637329.
  8. Scott Barrett, 2008. "The Incredible Economics of Geoengineering," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 39(1), pages 45-54, January.
  9. Hassan Benchekroun & Ngo Van Long, 1997. "Efficiency Inducing Taxation for Polluting Oligopolists," CIRANO Working Papers 97s-21, CIRANO.
  10. Yang, Zili, 2006. "Negatively correlated local and global stock externalities: tax or subsidy?," Environment and Development Economics, Cambridge University Press, vol. 11(03), pages 301-316, June.
  11. Arthur Caplan, 2006. "A Comparison of Emission Taxes and Permit Markets for Controlling Correlated Externalities," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 34(4), pages 471-492, August.
  12. Moslener, Ulf & Requate, Till, 2009. "The dynamics of optimal abatement strategies for multiple pollutants--An illustration in the Greenhouse," Ecological Economics, Elsevier, vol. 68(5), pages 1521-1534, March.
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