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Selective penalization of polluters: an inf-convolution approach

  • Ngo Long

    ()

  • Antoine Soubeyran

We consider an asymmetric polluting oligopoly. We demonstrate that optimal tax rates per unit of emission are not the same for all firms. We call this property selective penalization. Our Optimal Distortion Theorem states that the efficient tax structure requires that high cost firms pay a higher tax rate. Our Pro-concentration Motive Theorem states that optimal taxes increase the concentration of the industry, as measured by the Herfindahl index. Our Magnification Effect indicates that the variance of marginal costs is magnified by a factor which depends on the marginal cost of public funds. Copyright Springer-Verlag Berlin/Heidelberg 2005

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File URL: http://hdl.handle.net/10.1007/s00199-003-0433-9
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Article provided by Springer in its journal Economic Theory.

Volume (Year): 25 (2005)
Issue (Month): 2 (02)
Pages: 421-454

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Handle: RePEc:spr:joecth:v:25:y:2005:i:2:p:421-454
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  1. J. Peter Neary, 2000. "International Trade and the Environment - Theoretical and Policy Linkages," Working Papers 200018, School of Economics, University College Dublin.
  2. Rauscher, Michael, 1997. "International Trade, Factor Movements, and the Environment," OUP Catalogue, Oxford University Press, number 9780198290506, March.
  3. Hoel, Michael, 1993. "Intertemporal properties of an international carbon tax," Resource and Energy Economics, Elsevier, vol. 15(1), pages 51-70, March.
  4. Ngo, Van Long & Soubeyran, Antoine, 1997. "Cost heterogeneity, industry concentration and strategic trade policies," Journal of International Economics, Elsevier, vol. 43(1-2), pages 207-220, August.
  5. Long, N.V. & Soubeyran, A., 1998. "Cost Manipulation in Oligopoly: A Duality Approach," G.R.E.Q.A.M. 98a22, Universite Aix-Marseille III.
  6. Ngo Van Long & Antoine Soubeyran, 2001. "Emission Taxes and Standards for an Asymmetric Oligopoly," CIRANO Working Papers 2001s-07, CIRANO.
  7. Ngo Van Long & Antoine Soubeyran, 1999. "Existence and Uniqueness of Cournot Equilibrium: A Contraction Mapping Approach," CIRANO Working Papers 99s-22, CIRANO.
  8. Conrad Klaus, 1993. "Taxes and Subsidies for Pollution-Intensive Industries as Trade Policy," Journal of Environmental Economics and Management, Elsevier, vol. 25(2), pages 121-135, September.
  9. Hassan Benchekroun & Ngo Van Long, 1997. "Efficiency Inducing Taxation for Polluting Oligopolists," CIRANO Working Papers 97s-21, CIRANO.
  10. Gaudet, G. & Salant, S., 1988. "Uniqueness Of Cournot Equilibrium: New Results From Old Methods," Papers 89-10, Michigan - Center for Research on Economic & Social Theory.
  11. Long, N.V. & Soubeyran, A., 1998. "Cost Manipulation in an Asymmetric Oligopoly: The Taxation Problem," G.R.E.Q.A.M. 98a25, Universite Aix-Marseille III.
  12. Nathalie de Marcellis-Warin & Erwann Michel-Kerjan, 2001. "The Public-Private Sector Risk-Sharing in the French Insurance "Cat. Nat. System"""," CIRANO Working Papers 2001s-60, CIRANO.
  13. Ngo Van Long & Antoine Soubeyran, 1999. "Cost Manipulation Games in Oligopoly, with Costs of Manipulating," CIRANO Working Papers 99s-13, CIRANO.
  14. Ulph, Alistair, 1996. "Environmental Policy and International Trade when Governments and Producers Act Strategically," Journal of Environmental Economics and Management, Elsevier, vol. 30(3), pages 265-281, May.
  15. Hansson, Ingemar & Stuart, Charles, 1985. "Tax revenue and the marginal cost of public funds in Sweden," Journal of Public Economics, Elsevier, vol. 27(3), pages 331-353, August.
  16. Greg Shaffer & Stephen W. Salant, 1999. "Unequal Treatment of Identical Agents in Cournot Equilibrium," American Economic Review, American Economic Association, vol. 89(3), pages 585-604, June.
  17. Collie, David, 1993. "Strategic trade policy under asymmetric oligopoly," European Journal of Political Economy, Elsevier, vol. 9(2), pages 275-280, May.
  18. Browning, Edgar K, 1976. "The Marginal Cost of Public Funds," Journal of Political Economy, University of Chicago Press, vol. 84(2), pages 283-98, April.
  19. Buchanan, James M, 1969. "External Diseconomies, Corrective Taxes, and Market Structure," American Economic Review, American Economic Association, vol. 59(1), pages 174-77, March.
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