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Durable Emissions and Optimal Pigouvian Taxes

Author

Listed:
  • Rajeev K. Goel

    (Illinois State University)

  • Edward W. T. Hsieh

    (California State University, Los Angeles)

Abstract

This article examines the effectiveness of socially optimal taxes in controlling pollution (or other external effects) generated by a monopolist when pollution is a by-product of production and when emissions themselves are durable. Existing research has paid inadequate attention to the durability aspect, both of the product and of the resulting pollutants. In the two-period model presented here, a social planner minimizes social damage by setting the per-unit Pigouvian tax on a polluting monopolist. Results show that for a given level of production, the durability of emissions and the socially optimal Pigouvian tax are negatively related. This result holds irrespective of the durability of the good under production. The effect of a change in product durability is shown to depend on the output scale effects. Public policy implications are discussed.

Suggested Citation

  • Rajeev K. Goel & Edward W. T. Hsieh, 2004. "Durable Emissions and Optimal Pigouvian Taxes," Public Finance Review, , vol. 32(4), pages 441-449, July.
    • Handle: RePEc:sae:pubfin:v:32:y:2004:i:4:p:441-449
    DOI: 10.1177/1091142104264669
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    References listed on IDEAS

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    Cited by:

    1. Kinokuni, Hiroshi & Ohori, Shuichi & Tomoda, Yasunobu, 2021. "Advance disposal fee vs. disposal fee: A monopolistic producer’s durability choice model," Resource and Energy Economics, Elsevier, vol. 65(C).
    2. Shoji Haruna & Rajeev K. Goel, 2023. "Transboundary Pollution Control with Both Production and Consumption Emissions," CESifo Working Paper Series 10667, CESifo.
    3. Goel, Rajeev K. & Saunoris, James W., 2020. "Spatial spillovers of pollution onto the underground sector," Energy Policy, Elsevier, vol. 144(C).
    4. Shoji Haruna & Rajeev K. Goel, 2019. "Optimal pollution control in a mixed oligopoly with research spillovers," Australian Economic Papers, Wiley Blackwell, vol. 58(1), pages 21-40, March.
    5. Rajeev Goel, 2006. "Uncertain innovation with uncertain product durability," Applied Economics Letters, Taylor & Francis Journals, vol. 13(13), pages 829-834.

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