Optimal tax policy under heterogeneous environmental preferences
Abstract We model a federation of two heterogeneous jurisdictions where agents value consumption vs. nature differently. Consumption obtained through pollution-inducing production also generates a negative externality on neighbors. We show that even with a decentralized policy we can obtain first-best efficiency by choosing a combination of pollution taxes in both regions and lump-sum transfers. Moreover, we show that optimal pollution taxes are determined only by the externality parameters, independent of agents' preferences for consumption and nature.
|Date of creation:||Apr 2017|
|Date of revision:||Apr 2017|
|Contact details of provider:|| Postal: 401 Sunset Avenue, Windsor, Ontario, N9B 3P4|
Phone: (519) 253-4232 ext 2368
Fax: (519) 973-7096
Web page: http://www.uwindsor.ca/economics/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Fell, Harrison & Kaffine, Daniel T., 2014. "Can decentralized planning really achieve first-best in the presence of environmental spillovers?," Journal of Environmental Economics and Management, Elsevier, vol. 68(1), pages 46-53.
- Montgomery, W. David, 1972. "Markets in licenses and efficient pollution control programs," Journal of Economic Theory, Elsevier, vol. 5(3), pages 395-418, December.
- Baumol,William J. & Oates,Wallace E., 1988.
"The Theory of Environmental Policy,"
Cambridge University Press, number 9780521322249.
- Baumol,William J. & Oates,Wallace E., 1988. "The Theory of Environmental Policy," Cambridge Books, Cambridge University Press, number 9780521311120, September.
- Boadway, Robin & Song, Zhen & Tremblay, Jean-François, 2013. "Non-cooperative pollution control in an inter-jurisdictional setting," Regional Science and Urban Economics, Elsevier, vol. 43(5), pages 783-796.
- Oates, Wallace E. & Schwab, Robert M., 1988. "Economic competition among jurisdictions: efficiency enhancing or distortion inducing?," Journal of Public Economics, Elsevier, vol. 35(3), pages 333-354, April.
- Nicholas Z. Muller & Robert Mendelsohn, 2009. "Efficient Pollution Regulation: Getting the Prices Right," American Economic Review, American Economic Association, vol. 99(5), pages 1714-1739, December. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:wis:wpaper:1703. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Trudeau)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.