Spatial Economic Theory of Pollution Control under Stochastic Emissions
This paper examines the e ectiveness of environmental policies in curtailing pollution of a rm which is operating in a space economy under stochastic emissions. We consider a general n-input planar space production-location model, in which the output is produced jointly with the byproduct pollution. Although production is nonstochastic, the resulting pollution emission is assumed to have a random component, and the polluting rm must make its production and location decisions before the uncertainty is resolved. We provide some propositions concerning the comparative statics of the polluting rm's location choices, urban pollution concentration, and the relative impact of regulation via emission taxes to that of emission standards.
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