IDEAS home Printed from https://ideas.repec.org/p/irv/wpaper/080903.html
   My bibliography  Save this paper

Regulation with Budget Constraints Can Dominate Regulation by Price and by Quantity

Author

Listed:
  • Linda Cohen

    () (Department of Economics, University of California-Irvine)

  • Amihai Glazer

    () (Department of Economics, University of California-Irvine)

Abstract

A government can use several mechanisms to induce firms to reduce pollution. Well studied are regulations by price and by quantity. We consider a third form of regulation -- government allocates a budget to an agency which subsidizes abatement. We demonstrate that uncertainty can make such constrained regulation more efficient than either regulation by quantity or regulation by price. We also show that the optimal budget declines with a mean-preserving spread in the distribution of marginal costs.

Suggested Citation

  • Linda Cohen & Amihai Glazer, 2008. "Regulation with Budget Constraints Can Dominate Regulation by Price and by Quantity," Working Papers 080903, University of California-Irvine, Department of Economics.
  • Handle: RePEc:irv:wpaper:080903
    as

    Download full text from publisher

    File URL: https://www.economics.uci.edu/files/docs/workingpapers/2008-09/cohen-03.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Louis Kaplow & Steven Shavell, 2002. "On the Superiority of Corrective Taxes to Quantity Regulation," American Law and Economics Review, Oxford University Press, vol. 4(1), pages 1-17, January.
    2. Cameron Hepburn, 2006. "Regulation by Prices, Quantities, or Both: A Review of Instrument Choice," Oxford Review of Economic Policy, Oxford University Press, vol. 22(2), pages 226-247, Summer.
    3. Pizer, William A., 2002. "Combining price and quantity controls to mitigate global climate change," Journal of Public Economics, Elsevier, vol. 85(3), pages 409-434, September.
    4. Finkelshtain, Israel & Kislev, Yoav, 1997. "Prices versus Quantities: The Political Perspective," Journal of Political Economy, University of Chicago Press, vol. 105(1), pages 83-100, February.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Regulation; Environmental subsidy; Pollution control;

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:irv:wpaper:080903. 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: (Jennifer dos Santos). General contact details of provider: http://edirc.repec.org/data/deucius.html .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.