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Prices, Quantities, and Correlated Externalities

Author

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  • Arthur Caplan

Abstract

This paper provides an answer to the question, are emission taxes an efficient and self-enforcing mechanism to control correlated externality problems? By “correlated externality” we mean multiple pollutants that are jointly produced by a single source but which cause differentiated regional and global externalities. By “self-enforcing” we mean mechanisms that account for the endogeneity that exists between competing jurisdictions in the setting of environmental policy within a federation of regions. We find that, unlike joint domestic and international tradable permit markets, joint emissions taxes are neither efficient nor self-enforcing.

Suggested Citation

  • Arthur Caplan, 2003. "Prices, Quantities, and Correlated Externalities," Working Papers 2003-08, Utah State University, Department of Economics.
  • Handle: RePEc:usu:wpaper:2003-08
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    File URL: ftp://repec.bus.usu.edu/RePEc/usu/pdf/ERI2003-08.pdf
    File Function: First version, 2003
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    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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