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Inattention and pollution regulation policies

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  • Di Bartolomeo Giovanni
  • Saltari Enrico
  • Semmler Willi

Abstract

We study the problem of pollution control enacted by some policy of regulation and mitigation. The policymakers are subjected to a trade--off between welfare increasing economic activity and pollution effects from economic activity having a negative effect on current welfare. We hereby assume policymakers that are inattentive. They may respond imprecisely to the continuously available information since they have a limited information processing capacity or make decisions under limited information. Inattention is modeled by using Nonlinear Model Predictive Control. Specifically, our policymakers solve a dynamic decision problem with finite horizon that involves the repetitive solution of an optimal control problem at each sampling instant in a receding horizon fashion. A shorter horizon is interpreted as a measure of inattention. We find that inattention substantially affects the transition dynamics. It leads to quicker, but more costly, transitions. It also leads to an under-evaluation of the environmental costs that may accelerate climate change.

Suggested Citation

  • Di Bartolomeo Giovanni & Saltari Enrico & Semmler Willi, 2017. "Inattention and pollution regulation policies," wp.comunite 00130, Department of Communication, University of Teramo.
    • Handle: RePEc:ter:wpaper:00130
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    References listed on IDEAS

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    Cited by:

    1. Morakinyo O. Adetutu, 2025. "The political economy of environmental legislation: evidence from the British Parliament," Public Choice, Springer, vol. 203(1), pages 205-235, April.

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