IDEAS home Printed from https://ideas.repec.org/a/eee/resene/v38y2014icp141-167.html
   My bibliography  Save this article

Taxes versus quotas in lobbying by a polluting industry with private information on abatement costs

Author

Listed:
  • Miyamoto, Takuro

Abstract

We present a model of lobbying by a polluting industry with private information on pollution abatement costs and compare taxes with quotas under such conditions. We also examine the effect of private information on lobbying activity and social welfare under these two instruments. It is found that private information might improve social welfare under taxes when the government has little concern for social welfare, whereas private information does not improve social welfare under quotas. Quotas are generally socially preferred when the slope of marginal abatement costs is steeper than that of marginal damage or when the government does not concern itself with social welfare. However, private information reduces the comparative disadvantage of taxes compared to quotas when the government has little concern for social welfare. Finally, the results of numerical examples suggest that quotas are employed rather than taxes if the difference in natural emission levels between high- and low-cost industries is large.

Suggested Citation

  • Miyamoto, Takuro, 2014. "Taxes versus quotas in lobbying by a polluting industry with private information on abatement costs," Resource and Energy Economics, Elsevier, vol. 38(C), pages 141-167.
  • Handle: RePEc:eee:resene:v:38:y:2014:i:c:p:141-167
    DOI: 10.1016/j.reseneeco.2014.08.002
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0928765514000633
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Tracy R. Lewis, 1996. "Protecting the Environment When Costs and Benefits Are Privately Known," RAND Journal of Economics, The RAND Corporation, vol. 27(4), pages 819-847, Winter.
    2. Hoel, Michael & Karp, Larry, 2001. "Taxes and quotas for a stock pollutant with multiplicative uncertainty," Journal of Public Economics, Elsevier, vol. 82(1), pages 91-114, October.
    3. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, vol. 84(4), pages 833-850, September.
    4. Louis Kaplow & Steven Shavell, 2002. "On the Superiority of Corrective Taxes to Quantity Regulation," American Law and Economics Review, Oxford University Press, vol. 4(1), pages 1-17, January.
    5. Krysiak, Frank C. & Oberauner, Iris Maria, 2010. "Environmental policy à la carte: Letting firms choose their regulation," Journal of Environmental Economics and Management, Elsevier, vol. 60(3), pages 221-232, November.
    6. Bennedsen, Morten & Feldmann, Sven E., 2006. "Informational lobbying and political contributions," Journal of Public Economics, Elsevier, vol. 90(4-5), pages 631-656, May.
    7. Maia David & Bernard Sinclair-Desgagné, 2005. "Environmental Regulation and the Eco-Industry," Journal of Regulatory Economics, Springer, vol. 28(2), pages 141-155, September.
    8. Austen-Smith, David & Banks, Jeffrey S., 2002. "Costly signaling and cheap talk in models of political influence," European Journal of Political Economy, Elsevier, vol. 18(2), pages 263-280, June.
    9. Zhihao Yu, 2005. "Environmental Protection: A Theory of Direct and Indirect Competition for Political Influence," Review of Economic Studies, Oxford University Press, vol. 72(1), pages 269-286.
    10. Marcel Boyer & Jean-Jacques Laffont, 1999. "Toward a Political Theory of the Emergence of Environmental Incentive Regulation," RAND Journal of Economics, The RAND Corporation, vol. 30(1), pages 137-157, Spring.
    11. repec:cup:apsrev:v:89:y:1995:i:03:p:566-581_09 is not listed on IDEAS
    12. Matthias Dahm & Nicolás Porteiro, 2008. "Informational lobbying under the shadow of political pressure," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 30(4), pages 531-559, May.
    13. Paul Ekins & Stefan Speck, 1999. "Competitiveness and Exemptions From Environmental Taxes in Europe," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 13(4), pages 369-396, June.
    14. Canton, Joan, 2008. "Redealing the cards: How an eco-industry modifies the political economy of environmental taxes," Resource and Energy Economics, Elsevier, vol. 30(3), pages 295-315, August.
    15. Martin L. Weitzman, 1974. "Prices vs. Quantities," Review of Economic Studies, Oxford University Press, vol. 41(4), pages 477-491.
    16. Partha Dasgupta & Peter Hammond & Eric Maskin, 1980. "On Imperfect Information and Optimal Pollution Control," Review of Economic Studies, Oxford University Press, vol. 47(5), pages 857-860.
    17. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680.
    18. Conconi, Paola, 2003. "Green lobbies and transboundary pollution in large open economies," Journal of International Economics, Elsevier, vol. 59(2), pages 399-422, March.
    19. Newell, Richard G. & Pizer, William A., 2003. "Regulating stock externalities under uncertainty," Journal of Environmental Economics and Management, Elsevier, vol. 45(2, Supple), pages 416-432, March.
    20. Karp, Larry & Zhang, Jiangfeng, 2002. "Controlling a Stock Pollutant with Endogenous Abatement Capital and Asymmetric Information," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt2gj6z2gv, Department of Agricultural & Resource Economics, UC Berkeley.
    21. Maskin, Eric & Tirole, Jean, 1992. "The Principal-Agent Relationship with an Informed Principal, II: Common Values," Econometrica, Econometric Society, vol. 60(1), pages 1-42, January.
    22. Mandell, Svante, 2008. "Optimal mix of emissions taxes and cap-and-trade," Journal of Environmental Economics and Management, Elsevier, vol. 56(2), pages 131-140, September.
    23. Hoel, Michael & Karp, Larry, 2002. "Taxes versus quotas for a stock pollutant," Resource and Energy Economics, Elsevier, vol. 24(4), pages 367-384, November.
    24. Barbier, Edward B. & Damania, Richard & Leonard, Daniel, 2005. "Corruption, trade and resource conversion," Journal of Environmental Economics and Management, Elsevier, vol. 50(2), pages 276-299, September.
    25. Lohmann, Susanne, 1995. "Information, Access, and Contributions: A Signaling Model of Lobbying," Public Choice, Springer, vol. 85(3-4), pages 267-284, December.
    26. Larry Karp & Jiangfeng Zhang, 2005. "Regulation of Stock Externalities with Correlated Abatement Costs," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 32(2), pages 273-300, October.
    27. Fredriksson, Per G., 1997. "The Political Economy of Pollution Taxes in a Small Open Economy," Journal of Environmental Economics and Management, Elsevier, vol. 33(1), pages 44-58, May.
    28. Moledina, Amyaz A. & Coggins, Jay S. & Polasky, Stephen & Costello, Christopher, 2003. "Dynamic environmental policy with strategic firms: prices versus quantities," Journal of Environmental Economics and Management, Elsevier, vol. 45(2, Supple), pages 356-376, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ian A. MacKenzie, 2015. "Prices versus quantities with distributional rent seeking," Discussion Papers Series 548, School of Economics, University of Queensland, Australia.
    2. repec:kap:pubcho:v:171:y:2017:i:1:d:10.1007_s11127-017-0401-8 is not listed on IDEAS

    More about this item

    Keywords

    Tax versus quota; Lobby; Asymmetric information;

    JEL classification:

    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:resene:v:38:y:2014:i:c:p:141-167. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/locate/inca/505569 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.