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Coasean Bargaining in the Presence of Pigouvian Taxation: Revisiting the Buchanan-Stubblebine-Turvey Theorem

Coasean arguments against the Pigouvian perspective are well established. A central tenet in this criticism argues that a Pigouvian tax may be a source of inefficiency: if parties were to bargain in the presence of a Pigouvian tax, (allocative) inefficiencies would occur-the so-called Buchanan-Stubblebine-Turvey Theorem. By analyzing a Coasean environment where the appropriation of property rights is costly, we show-in contrast to the Buchanan-Stubblebine-Turvey Theorem-that Coasean bargaining in the presence of a pre-existing (Pigouvian) tax is Pareto improving. This has implications for policy where dual regulatory environments exist, such as regulation at the state and federal level, as well as environmental liability and litigation.

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Paper provided by School of Economics, University of Queensland, Australia in its series Discussion Papers Series with number 515.

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Date of creation: 01 May 2014
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Handle: RePEc:qld:uq2004:515
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  1. Terry L. Anderson & Dominic P. Parker, 2013. "Transaction Costs and Environmental Markets: The Role of Entrepreneurs," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 7(2), pages 259-275, July.
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  3. Robson, Alex, 2012. "Transaction Costs can Encourage Coasean Bargaining," MPRA Paper 40892, University Library of Munich, Germany.
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  5. Ian A. MacKenzie & Markus Ohndorf, 2012. "Restricted Coasean Bargaining," CER-ETH Economics working paper series 12/156, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
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  7. Stephanie Rosenkranz & Patrick W. Schmitz, 2006. "Can Coasean bargaining justify Pigouvian taxation?," Bonn Econ Discussion Papers bgse7_2006, University of Bonn, Germany.
  8. Ian A. MacKenzie & Markus Ohndorf, 2013. "Caps on Coasean Transfers," Discussion Papers Series 485, School of Economics, University of Queensland, Australia.
  9. Arye L. Hillman & John G. Riley, 1987. "Politically Contestable Rents and Transfers," UCLA Economics Working Papers 452, UCLA Department of Economics.
  10. Steven G. Medema, 2014. "The Curious Treatment of the Coase Theorem in the Environmental Economics Literature, 1960--1979," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 8(1), pages 39-57, January.
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  12. Aivazian, Varouj A & Callen, Jeffrey L, 1981. "The Coase Theorem and the Empty Core," Journal of Law and Economics, University of Chicago Press, vol. 24(1), pages 175-81, April.
  13. Alex Robson & Stergios Skaperdas, 2008. "Costly enforcement of property rights and the Coase theorem," Economic Theory, Springer, vol. 36(1), pages 109-128, July.
  14. Frank A. Sloan & Justin G. Trogdon, 2004. "The impact of the master settlement agreement on cigarette consumption," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 23(4), pages 843-855.
  15. Cristina Ciocirlan & Bruce Yandle, 2003. "The Political Economy of Green Taxation in OECD Countries," European Journal of Law and Economics, Springer, vol. 15(3), pages 203-218, May.
  16. Stergios Skaperdas & Samarth Vaidya, 2007. "Persuasion as a Contest," CESifo Working Paper Series 2160, CESifo Group Munich.
  17. Farmer, Amy & Pecorino, Paul, 1999. " Legal Expenditure as a Rent-Seeking Game," Public Choice, Springer, vol. 100(3-4), pages 271-88, September.
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  19. Parisi, Francesco, 2003. " Political Coase Theorem," Public Choice, Springer, vol. 115(1-2), pages 1-36, April.
  20. H. Spencer Banzhaf & Timothy Fitzgerald & Kurt Schnier, 2013. "Nonregulatory Approaches to the Environment: Coasean and Pigouvian Perspectives," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 7(2), pages 238-258, July.
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