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Firm Preferences for Environmental Policy: Industry Uniform or Firm Specific?

Author

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  • Akhundjanov, Sherzod B.
  • Munoz-Garcia, Felix

Abstract

This paper examines the effect of uniform and firm-specific environmental regulation on the production decisions, and profits, of polluting and green firms. While both types of regulation increase firms' costs and thus entail a negative effect on profits, firm-specific regulation can also yield a positive effect for relatively inefficient firms by alleviating their cost disadvantage. When such cost disadvantage is sufficiently large, we show that the positive effect of firm-specific regulation dominates its negative effect, leading inefficient (efficient) firms to support (oppose) socially optimal regulation. Furthermore, our findings indicate that such support for environmental policy can originate not only from the most common ally (the green firm) but also from polluting firms.

Suggested Citation

  • Akhundjanov, Sherzod B. & Munoz-Garcia, Felix, 2016. "Firm Preferences for Environmental Policy: Industry Uniform or Firm Specific?," Strategic Behavior and the Environment, now publishers, vol. 6(1-2), pages 135-180, December.
    • Handle: RePEc:now:jnlsbe:102.00000066
    DOI: 10.1561/102.00000066
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    Citations

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    Cited by:

    1. Strandholm, John C. & Espínola-Arredondo, Ana & Munoz-Garcia, Felix, 2018. "Regulation, free-riding incentives, and investment in R&D with spillovers," Resource and Energy Economics, Elsevier, vol. 53(C), pages 133-146.
    2. Sherzod B. Akhundjanov & Felix Muñoz-García, 2019. "Transboundary Natural Resources, Externalities, and Firm Preferences for Regulation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 73(1), pages 333-352, May.
    3. Muñoz-García Félix & Akhundjanov Sherzod B., 2016. "Can Polluting Firms Favor Regulation?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 16(4), pages 1-23, October.

    More about this item

    Keywords

    Cost asymmetry; cost disadvantage; emission fees; green firms;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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