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Environmental risk and extended liability: The case of green technologies


  • Dionne, Georges
  • Spaeter, Sandrine


Since CERCLA's legislation in the United States, extending the liability to banks in case of an environmental damage has been the main concern of many studies. Most of them show that this form of regulation cannot reach its two main objectives because it is not possible to simultaneously improve prevention done by the frims and increase the funds available for indemnification and clean-up. In this paper, the global effect of CERCLA is revisited in an different but realistic framework.
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Suggested Citation

  • Dionne, Georges & Spaeter, Sandrine, 2003. "Environmental risk and extended liability: The case of green technologies," Journal of Public Economics, Elsevier, vol. 87(5-6), pages 1025-1060, May.
  • Handle: RePEc:eee:pubeco:v:87:y:2003:i:5-6:p:1025-1060

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    References listed on IDEAS

    1. T. Randolph Beard, 1990. "Bankruptcy and Care Choice," RAND Journal of Economics, The RAND Corporation, vol. 21(4), pages 626-634, Winter.
    2. Brander, James A & Spencer, Barbara J, 1989. "Moral Hazard and Limited Liability: Implications for the Theory of the Firm," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(4), pages 833-849, November.
    3. Chang, Chun, 1990. "The dynamic structure of optimal debt contracts," Journal of Economic Theory, Elsevier, vol. 52(1), pages 68-86, October.
    4. Dionne, G. & Viala, P., 1992. "Optimal Design of Financial Contracts and Moral Hazard," Cahiers de recherche 9219, Universite de Montreal, Departement de sciences economiques.
    5. Boyer, Marcel & Laffont, Jean-Jacques, 1997. "Environmental risks and bank liability," European Economic Review, Elsevier, vol. 41(8), pages 1427-1459, August.
    6. Marco LiCalzi & Sandrine Spaeter, 2003. "Distributions for the first-order approach to principal-agent problems," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 21(1), pages 167-173, January.
    7. Coestier, B., 2000. "Dynamic Financial Contract under Extended Liability," Ecole des Hautes Etudes Commerciales de Montreal- 00-08, Ecole des Hautes Etudes Commerciales de Montreal-Chaire de gestion des risques..
    8. Bruno Jullien & Georges Dionne & Bernard Caillaud, 2000. "Corporate insurance with optimal financial contracting," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 16(1), pages 77-105.
    9. Posey, Lisa Lipowski, 1993. "Limited liability and incentives when firms can inflict damages greater than net worth," International Review of Law and Economics, Elsevier, vol. 13(3), pages 325-330, September.
    10. Froot, Kenneth A & Scharfstein, David S & Stein, Jeremy C, 1993. " Risk Management: Coordinating Corporate Investment and Financing Policies," Journal of Finance, American Finance Association, vol. 48(5), pages 1629-1658, December.
    11. Craig, Ben & Thiel, Stuart E., 1990. "Large risks and the decision to incorporate," Journal of Economics and Business, Elsevier, vol. 42(3), pages 185-194, August.
    12. Pitchford, Rohan, 1995. "How Liable Should a Lender Be? The Case of Judgment-Proof Firms and Environmental Risk," American Economic Review, American Economic Association, vol. 85(5), pages 1171-1186, December.
    13. Sappington, David, 1983. "Limited liability contracts between principal and agent," Journal of Economic Theory, Elsevier, vol. 29(1), pages 1-21, February.
    14. Douglas Gale & Martin Hellwig, 1985. "Incentive-Compatible Debt Contracts: The One-Period Problem," Review of Economic Studies, Oxford University Press, vol. 52(4), pages 647-663.
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    More about this item

    JEL classification:

    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • K32 - Law and Economics - - Other Substantive Areas of Law - - - Energy, Environmental, Health, and Safety Law
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory


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