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Environmental Liability Law and Induced Technical Change: The Role of Spillovers

  • Alfred Endres
  • Bianca Rundshagen
  • Regina Bertram

We investigate the incentives of environmental liability law to improve pollution control technology. It is shown that equilibrium choice of abatement technology and of the level of pollution reduction is socially optimal under very restrictive conditions. However, technological spillovers distort the incentives to innovate. The negligence rule turns out to be less sensitive to this problem than strict liability if the due-care standard is set sufficiently close to the second-best level of care.

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Article provided by Mohr Siebeck, Tübingen in its journal Journal of Institutional and Theoretical Economics.

Volume (Year): 164 (2008)
Issue (Month): 2 (June)
Pages: 254-279

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Handle: RePEc:mhr:jinste:urn:sici:0932-4569(200806)164:2_254:ellait_2.0.tx_2-7
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  1. Parry, Ian & Pizer, William & Fischer, Carolyn, 1998. "Instrument Choice for Environmental Protection When Technological Innovation is Endogenous," Discussion Papers dp-99-04, Resources For the Future.
  2. Endres, A. & Ludeke, A., 1998. "Incomplete strict liability: effects on product differentiation and information provision 1," International Review of Law and Economics, Elsevier, vol. 18(4), pages 511-528, December.
  3. Ben-Shahar, Omri, 1998. "Should Products Liability Be Based on Hindsight?," Journal of Law, Economics and Organization, Oxford University Press, vol. 14(2), pages 325-57, October.
  4. Biglaiser, Gary & Horowitz, John K & Quiggin, John, 1995. "Dynamic Pollution Regulation," Journal of Regulatory Economics, Springer, vol. 8(1), pages 33-44, July.
  5. Golombek, Rolf & Hoel, Michael, 2003. "Climate Policy under Technology Spillovers," Memorandum 22/2003, Oslo University, Department of Economics.
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