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Intra-Industry Reallocations and Long-run Impacts of Environmental Regulations

Author

Listed:
  • Yoshifumi Konishi

    () (Faculty of Liberal Arts, Sophia University)

  • Nori Tarui

    () (Department of Economics, University of Hawaii at Manoa)

Abstract

We investigate the long-run impact of environmental regulations on the intra-industry distribution of firm-level productivity and the resulting aggregate variables. In a general-equilibrium model that accounts for endogenous entry/exit of heterogeneous firms, neither the average productivity of firms nor the mass of firms is independent of the choice of policy instruments (i.e. emissions tax vs. emissions trading) or permit allocation rules. The equilibrium price of permits under emissions trading is lower than the emissions tax rate that would support the same aggregate emissions. An incomplete emissions market results in a net increase in combined aggregate emissions.

Suggested Citation

  • Yoshifumi Konishi & Nori Tarui, 2013. "Intra-Industry Reallocations and Long-run Impacts of Environmental Regulations," Working Papers 201307, University of Hawaii at Manoa, Department of Economics.
  • Handle: RePEc:hai:wpaper:201307
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    File URL: http://www.economics.hawaii.edu/research/workingpapers/WP_13-7.pdf
    File Function: First version, 2013
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    References listed on IDEAS

    as
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    Cited by:

    1. Yoshifumi Konishi & Nori Tarui, 2015. "Emissions Trading, Firm Heterogeneity, and Intra-industry Reallocations in the Long Run," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, pages 1-42.
    2. Yoshifumi Konishi & Nori Tarui, 2015. "Emissions Trading, Firm Heterogeneity, and Intra-industry Reallocations in the Long Run," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, pages 1-42.

    More about this item

    Keywords

    Emissions Tax; Emissions Trading; Heterogeneous Firms; Endogenous Entry/Exit; Melitz Model; Incomplete Regulation; Emissions Leakage;

    JEL classification:

    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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