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Interregional Competition, Spillovers and Attachment in a Federation

  • Emilson Caputo Delfino Silva

    (UCB)

  • Chikara Yamaguchi

    (OKKAIDO UNIVERSITY)

We examine decentralized environmental policy making in a federation characterized by decentralized leadership and imperfect labor mobility due to attachment to regions. Energy consumption generates positive consumption benefits, but energy supply generates federal air pollution. Regional authorities regulate energy supply by controlling supplies of pollution permits. Energy and pollution permits are traded in interregional markets. The center redistributes incomes after it observes regional supplies of pollution permits. Regions are populated by mobile and immobile households and profits are expatriated. We show that the subgame perfect equilibrium for the federal policy game played by regional and central authorities is socially optimal.

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Paper provided by ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics] in its series Anais do XXXI Encontro Nacional de Economia [Proceedings of the 31th Brazilian Economics Meeting] with number b53.

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Date of creation: 2003
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Handle: RePEc:anp:en2003:b53
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  1. Myers & G.M., 1989. "Optimality, Free Mobility And The Regional Authority In Federation," Working Papers 10, John Deutsch Institute for the Study of Economic Policy.
  2. Boadway, Robin, 1982. "On the Method of Taxation and the Provision of Local Public Goods: Comment," American Economic Review, American Economic Association, vol. 72(4), pages 846-51, September.
  3. Caplan, Arthur J. & Cornes, Richard C. & Silva, Emilson C. D., 2000. "Pure public goods and income redistribution in a federation with decentralized leadership and imperfect labor mobility," Journal of Public Economics, Elsevier, vol. 77(2), pages 265-284, August.
  4. Mansoorian, Arman & Myers, Gordon M., 1993. "Attachment to home and efficient purchases of population in a fiscal externality economy," Journal of Public Economics, Elsevier, vol. 52(1), pages 117-132, August.
  5. Wellisch, Dietmar, 1994. "Interregional spillovers in the presence of perfect and imperfect household mobility," Journal of Public Economics, Elsevier, vol. 55(2), pages 167-184, October.
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