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Environmental regulation of technically inefficient firms

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  • Wichmann, Bruno

Abstract

This paper presents a model in which a technically inefficient firm is responsible for the emissions of pollutants. We derive second-best regulatory schemes (tax and quota) assuming that the firm’s technical efficiency is unknown to the regulator.

Suggested Citation

  • Wichmann, Bruno, 2013. "Environmental regulation of technically inefficient firms," Economics Letters, Elsevier, vol. 121(2), pages 143-147.
  • Handle: RePEc:eee:ecolet:v:121:y:2013:i:2:p:143-147
    DOI: 10.1016/j.econlet.2013.08.010
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    References listed on IDEAS

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    1. Martin L. Weitzman, 1974. "Prices vs. Quantities," Review of Economic Studies, Oxford University Press, vol. 41(4), pages 477-491.
    2. Afriat, Sidney N, 1972. "Efficiency Estimation of Production Function," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 13(3), pages 568-598, October.
    3. Muller Nicholas Z, 2011. "Linking Policy to Statistical Uncertainty in Air Pollution Damages," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-29, June.
    4. Richmond, J, 1974. "Estimating the Efficiency of Production," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 15(2), pages 515-521, June.
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    More about this item

    Keywords

    Technical efficiency; Asymmetric information; Tax; Quota; Second-best regulation;

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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