IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Environmental Accidents Under Moral Hazard and Limited Firm Liability

  • Strand, J.

We study optimal government policy when firms' operations involve a risk of a large environmental accident, firms do not have sufficient assets to cover such costs, and the risk is affected by firms' efforts which are unobservable to outsiders. When firms' profits and government revenues have equal weights in the social welfare function, a first best can be implemented and requires that the firm be subsidized heavily when operating with no accident, and all its assets confiscated in the event of an accident. With a lower weight on firm profits the solution is always second best, with lower subsidies to the firm, and a firm effort lower than at the first-best solution. When firm investments affect both the required accident-preventing effort for given risk and the work effort required for a given output, the first best never involves specific investment subsidies, while a second-best solution generally always does. Copyright Kluwer Academic Publishers 1994

(This abstract was borrowed from another version of this item.)

To our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.

Paper provided by Oslo University, Department of Economics in its series Memorandum with number 22/1992.

as
in new window

Length: 19 pages
Date of creation: 1992
Date of revision:
Handle: RePEc:hhs:osloec:1992_022
Contact details of provider: Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
Phone: 22 85 51 27
Fax: 22 85 50 35
Web page: http://www.oekonomi.uio.no/indexe.html
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
  2. Laffont, Jean-Jacques & Tirole, Jean, 1990. "Adverse Selection and Renegotiation in Procurement," Review of Economic Studies, Wiley Blackwell, vol. 57(4), pages 597-625, October.
  3. Hahn, Robert W, 1990. " The Political Economy of Environmental Regulation: Towards a Unifying Framework," Public Choice, Springer, vol. 65(1), pages 21-47, April.
  4. 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.
  5. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
  6. T. Randolph Beard, 1990. "Bankruptcy and Care Choice," RAND Journal of Economics, The RAND Corporation, vol. 21(4), pages 626-634, Winter.
  7. Mayshar, Joram, 1977. "Should Government Subsidize Risky Private Projects?," American Economic Review, American Economic Association, vol. 67(2), pages 20-28, March.
  8. Laffont, Jean-Jacques & Tirole, Jean, 1986. "Using Cost Observation to Regulate Firms," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 614-41, June.
  9. Stiglitz, Joseph E & Weiss, Andrew, 1983. "Incentive Effects of Terminations: Applications to the Credit and Labor Markets," American Economic Review, American Economic Association, vol. 73(5), pages 912-27, December.
  10. Eirik Amundsen, 1992. "Optimal failure rates and penalty-bonus policies in the offshore petroleum sector," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 2(5), pages 469-489, September.
  11. Myers, Stewart C. & Majluf, Nicolás S., 1945-, 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Working papers 1523-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  12. Gabel H. Landis & Sinclair-Desgagne Bernard, 1993. "Managerial Incentives and Environmental Compliance," Journal of Environmental Economics and Management, Elsevier, vol. 24(3), pages 229-240, May.
  13. Robert E. Kohn, 1985. "A General Equilibrium Analysis of the Optimal Number of Firms in a Polluting Industry," Canadian Journal of Economics, Canadian Economics Association, vol. 18(2), pages 347-54, May.
  14. Spulber, Daniel F., 1985. "Effluent regulation and long-run optimality," Journal of Environmental Economics and Management, Elsevier, vol. 12(2), pages 103-116, June.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:hhs:osloec:1992_022. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Rhiana Bergh-Seeley)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.