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A Framework to Compare Environmental Policies

  • Don Fullerton


    (Department of Economics, University of Texas at Austin)

This paper builds a single model that can be used to show efficiency and distributional effects of eight different types of environmental policies (including taxes, subsidies, regulations, permits, and legal liability). All eight approaches can be designed to have the same efficiency effects, even while they have different distributional effects. For further evaluation of these policies, the paper discusses other criteria outside the simple model (including administrative efficiency, enforcement capabilities, and political feasibility). The paper ends with a discussion of likely trade-offs among these often-competing objectives of environmental policy.

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Article provided by Southern Economic Association in its journal Southern Economic Journal.

Volume (Year): 68 (2001)
Issue (Month): 2 (October)
Pages: 224-248

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Handle: RePEc:sej:ancoec:v:68:2:y:2001:p:224-248
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  1. 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.
  2. Hahn, Robert W, 1989. "Economic Prescriptions for Environmental Problems: How the Patient Followed the Doctor's Orders," Journal of Economic Perspectives, American Economic Association, vol. 3(2), pages 95-114, Spring.
  3. Thomas A. Barthold, 1994. "Issues in the Design of Environmental Excise Taxes," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 133-151, Winter.
  4. Ian Parry, 1998. "A Second-Best Analysis of Environmental Subsidies," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 5(2), pages 153-170, May.
  5. Leonard P. Gianessi & Henry M. Peskin, 1980. "The Distribution of the Costs of Federal Water Pollution Control Policy," Land Economics, University of Wisconsin Press, vol. 56(1), pages 85-102.
  6. Robison, H David, 1985. "Who Pays for Industrial Pollution Abatement?," The Review of Economics and Statistics, MIT Press, vol. 67(4), pages 702-06, November.
  7. Slemrod, Joel, 1990. "Optimal Taxation and Optimal Tax Systems," Journal of Economic Perspectives, American Economic Association, vol. 4(1), pages 157-78, Winter.
  8. Buchanan, James M & Tullock, Gordon, 1975. "Polluters' Profits and Political Response: Direct Controls Versus Taxes," American Economic Review, American Economic Association, vol. 65(1), pages 139-47, March.
  9. Metcalf, Gilbert E., 1999. "A Distributional Analysis of Green Tax Reforms," National Tax Journal, National Tax Association, vol. 52(n. 4), pages 655-82, December.
  10. Stavins Robert N., 1995. "Transaction Costs and Tradeable Permits," Journal of Environmental Economics and Management, Elsevier, vol. 29(2), pages 133-148, September.
  11. Pearce, David W, 1991. "The Role of Carbon Taxes in Adjusting to Global Warming," Economic Journal, Royal Economic Society, vol. 101(407), pages 938-48, July.
  12. Don Fullerton & Gilbert Metcalf, 1997. "Environmental Controls, Scarcity Rents, and Pre-Existing Distortions," NBER Working Papers 6091, National Bureau of Economic Research, Inc.
  13. Cropper, Maureen L & Oates, Wallace E, 1992. "Environmental Economics: A Survey," Journal of Economic Literature, American Economic Association, vol. 30(2), pages 675-740, June.
  14. Bovenberg, A.L. & de Mooij, R.A., 1994. "Environmental levies and distortionary taxation," Other publications TiSEM 4b32deaa-ec2f-4de7-b59b-9, Tilburg University, School of Economics and Management.
  15. Maloney, Michael T & McCormick, Robert E, 1982. "A Positive Theory of Environmental Quality Regulation," Journal of Law and Economics, University of Chicago Press, vol. 25(1), pages 99-123, April.
  16. Joel Slemrod & Nikki Sorum, 1984. "The Compliance Cost of the U.S. Individual Income Tax System," NBER Working Papers 1401, National Bureau of Economic Research, Inc.
  17. Parry, Ian W. H., 1997. "Environmental taxes and quotas in the presence of distorting taxes in factor markets," Resource and Energy Economics, Elsevier, vol. 19(3), pages 203-220, August.
  18. R. G. Lipsey & Kelvin Lancaster, 1956. "The General Theory of Second Best," Review of Economic Studies, Oxford University Press, vol. 24(1), pages 11-32.
  19. Ballard, Charles L. & Medema, Steven G., 1993. "The marginal efficiency effects of taxes and subsidies in the presence of externalities : A computational general equilibrium approach," Journal of Public Economics, Elsevier, vol. 52(2), pages 199-216, September.
  20. Seskin, Eugene P. & Anderson, Robert Jr. & Reid, Robert O., 1983. "An empirical analysis of economic strategies for controlling air pollution," Journal of Environmental Economics and Management, Elsevier, vol. 10(2), pages 112-124, June.
  21. Krueger, Anne O, 1974. "The Political Economy of the Rent-Seeking Society," American Economic Review, American Economic Association, vol. 64(3), pages 291-303, June.
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