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Productivity Dispersion across Plants, Emission Abatement, and Environmental Policy

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  • Li, Zhe

Abstract

Empirical studies suggest systematic relationships between plant’s productivity and plant’s emissions and emission-abatement costs. This paper demonstrates that productivity dispersion across plants is an important factor that influences the transmission of environmental policy. Within a general equilibrium framework, I model heterogeneous polluting plants by allowing them to be differing in productivity and to choose optimally a discrete emission-reduction technology taking into account both the costs of reducing emissions and the competition in the goods market. An emission-reduction policy affects the distribution of plants with the advanced abatement technology and relocates resources and market shares across plants. As a result, the aggregate effects of an environmental policy depend on the degree of productivity dispersion. Using Canadian data, I show quantitatively that the aggregate effects of an environmental policy significantly affected by the degree of productivity dispersion both in the transition periods and in the long-run steady-state equilibrium.

Suggested Citation

  • Li, Zhe, 2008. "Productivity Dispersion across Plants, Emission Abatement, and Environmental Policy," MPRA Paper 9564, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:9564
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    File URL: https://mpra.ub.uni-muenchen.de/9564/1/MPRA_paper_9564.pdf
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    References listed on IDEAS

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    Cited by:

    1. Bajona, Claustre & Pierce, Andrea & Missios, Paul, 2010. "Trade and the Environment with Heterogeneous Firms," MPRA Paper 71405, University Library of Munich, Germany.

    More about this item

    JEL classification:

    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • E00 - Macroeconomics and Monetary Economics - - General - - - General
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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