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Environmental Regulation Modeled as a Public Input Proportional to Capital Investment

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  • Mitch Kunce

Abstract

Public inputs, when referred to as unpaid factors, are included in production specifications characterized by constant returns to scale in all inputs. In equilibrium, the public input rent generated by this configuration must be allocated among firms based on some measure of productive activity. Herein, decentralized environmental regulation is modeled as a public input of the unpaid type. Environmental rent is then rationed to private firms in proportion to their capital investment. Results reveal that source based capital taxation will capture these environmental rents, however, will not yield efficiency in the devolved interjurisdictional framework. The capital tax must be complemented by benefit taxation in order to provide efficient local public expenditures and socially optimal levels of environmental quality. JEL classification numbers: H42, H54, H71.

Suggested Citation

  • Mitch Kunce, 2022. "Environmental Regulation Modeled as a Public Input Proportional to Capital Investment," Journal of Risk & Control, SCIENPRESS Ltd, vol. 9(1), pages 1-1.
    • Handle: RePEc:spt:rmkjrc:v:9:y:2022:i:1:f:9_1_1
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    References listed on IDEAS

    as
    1. Mitch Kunce & Jason Shogren, 2005. "On Efficiency of Decentralized Environmental Regulation," Journal of Regulatory Economics, Springer, vol. 28(2), pages 129-140, September.
    2. Feehan, James P, 1989. "Pareto-Efficiency with Three Varieties of Public Input," Public Finance = Finances publiques, , vol. 44(2), pages 237-248.
    3. Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association;National Tax Journal, vol. 52(2), pages 269-304, June.
    4. Wilson, John D., 1986. "A theory of interregional tax competition," Journal of Urban Economics, Elsevier, vol. 19(3), pages 296-315, May.
    5. Oates, Wallace E. & Schwab, Robert M., 1988. "Economic competition among jurisdictions: efficiency enhancing or distortion inducing?," Journal of Public Economics, Elsevier, vol. 35(3), pages 333-354, April.
    6. Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 269-304, June.
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    Keywords

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    JEL classification:

    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue

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