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Information Disclosure as Environmental Regulation: A Theoretical Analysis

  • Mark Cohen

    ()

  • V. Santhakumar

Governments around the world are beginning to embrace a new form of environmental regulation – mandatory disclosure of information. While information disclosure programs appear to have an impact on subsequent firm behavior – often resulting in lower levels of pollution – little is known about the costs and benefits of these programs and whether or not they enhance social welfare. This paper presents a simple bargaining model where mandatory information disclosure is used to overcome a lack of information on the part of the public. We characterize the conditions under which information disclosure will lead to a reduction in emissions, and ultimately, the conditions under which it will enhance social welfare. Several extensions of the model are briefly explored, including the effect of two sources of pollution – only one of which is subject to information disclosure. Copyright Springer Science+Business Media, Inc. 2007

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File URL: http://hdl.handle.net/10.1007/s10640-006-9052-9
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Article provided by European Association of Environmental and Resource Economists in its journal Environmental and Resource Economics.

Volume (Year): 37 (2007)
Issue (Month): 3 (July)
Pages: 599-620

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Handle: RePEc:kap:enreec:v:37:y:2007:i:3:p:599-620
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=100263

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  1. Hamilton James T., 1995. "Pollution as News: Media and Stock Market Reactions to the Toxics Release Inventory Data," Journal of Environmental Economics and Management, Elsevier, vol. 28(1), pages 98-113, January.
  2. Dasgupta, Susmita & Jong Ho Hong & Laplante, Benoit & Mamingi, Nlandu, 2004. "Disclosure of environmental violations and the stock market in the Republic of Korea," Policy Research Working Paper Series 3344, The World Bank.
  3. Kennedy, P. & Laplante, B. & Maxwell, J., 1990. "Pollution Policy: The Role of Publicly Provided Information," Papers 9021, Laval - Recherche en Energie.
  4. John W. Maxwell & Thomas P Lyon & Steven C.. Hackett, 1995. "Self-Regulation and Social Welfare: The Political Economy of Corporate Environmentalism," University of Chicago - George G. Stigler Center for Study of Economy and State 122, Chicago - Center for Study of Economy and State.
  5. Afsah, Shakeb & Laplante, Benoit & Wheeler, David, 1996. "Controlling industrial pollution : a new paradigm," Policy Research Working Paper Series 1672, The World Bank.
  6. Konar, Shameek & Cohen, Mark A., 1997. "Information As Regulation: The Effect of Community Right to Know Laws on Toxic Emissions," Journal of Environmental Economics and Management, Elsevier, vol. 32(1), pages 109-124, January.
  7. Felix Oberholzer-Gee & Miki Mitsunari, 2006. "Information regulation: Do the victims of externalities pay attention?," Journal of Regulatory Economics, Springer, vol. 30(2), pages 141-158, 08.
  8. Tom Tietenberg, 1998. "Disclosure Strategies for Pollution Control," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 11(3), pages 587-602, April.
  9. Khanna, Madhu & Quimio, Wilma Rose H. & Bojilova, Dora, 1998. "Toxics Release Information: A Policy Tool for Environmental Protection," Journal of Environmental Economics and Management, Elsevier, vol. 36(3), pages 243-266, November.
  10. Kennedy Peter W. & Laplante Benoit & Maxwell John, 1994. "Pollution Policy: the Role for Publicly Provided Information," Journal of Environmental Economics and Management, Elsevier, vol. 26(1), pages 31-43, January.
  11. Huber, Claus & Wirl, Franz, 1998. "The Polluter Pays versus the Pollutee Pays Principle under Asymmetric Information," Journal of Environmental Economics and Management, Elsevier, vol. 35(1), pages 69-87, January.
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