IDEAS home Printed from https://ideas.repec.org/p/zbw/gdec10/24.html
   My bibliography  Save this paper

Prices vs. Quantities with incomplete enforcement and different enforcement probabilities

Author

Listed:
  • Rohling, Moritz

Abstract

Regulating inter-country externalities, like climate change, raises various enforcement problems. It is often argued that international pricebased regulations (e.g. emission taxes) are more difficult to enforce than quantity-based regulations (e.g. tradable pollution permits). In this paper, we analyze the relative performance of price-based and quantity-based instruments for cases where costs and benefits are uncertain and enforcement of quantity regimes is stricter than for price-based regimes. We show that under these conditions, instrument choice solely based on the relative slopes of the marginal costs can be inefficient. If enforcement probabilities differ, rational policy choice should also take into account the level of the marginal benefit curve, as well as institutional parameters. In contrast to earlier analyses on Prices vs. Quantities, we find that the difference in welfare for both policy instruments also depends on the variance of the marginal abatement costs. Furthermore, numerical simulations of our stylized model suggest that, for climate policies, quantity-regulations might well be preferable to price-based approaches after all.

Suggested Citation

  • Rohling, Moritz, 2010. "Prices vs. Quantities with incomplete enforcement and different enforcement probabilities," Proceedings of the German Development Economics Conference, Hannover 2010 24, Verein für Socialpolitik, Research Committee Development Economics.
  • Handle: RePEc:zbw:gdec10:24
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/39999/1/291_rohling.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Paul Gertler & David I. Levine & Enrico Moretti, 2009. "Do microfinance programs help families insure consumption against illness?," Health Economics, John Wiley & Sons, Ltd., vol. 18(3), pages 257-273.
    2. Shahidur R. Khandker, 2007. "Coping with flood: role of institutions in Bangladesh," Agricultural Economics, International Association of Agricultural Economists, vol. 36(2), pages 169-180, March.
    3. Lorenzo Guarcello & Fabrizia Mealli & Furio Rosati, 2010. "Household vulnerability and child labor: the effect of shocks, credit rationing, and insurance," Journal of Population Economics, Springer;European Society for Population Economics, vol. 23(1), pages 169-198, January.
    4. Hanan G. Jacoby & Emmanuel Skoufias, 1997. "Risk, Financial Markets, and Human Capital in a Developing Country," Review of Economic Studies, Oxford University Press, vol. 64(3), pages 311-335.
    5. Yasuyuki Sawada & Satoshi Shimizutani, 2008. "How Do People Cope with Natural Disasters? Evidence from the Great Hanshin-Awaji (Kobe) Earthquake in 1995," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(2-3), pages 463-488, March.
    6. Del Ninno, Carlo & Dorosh, Paul A. & Smith, Lisa C., 2003. "Public Policy, Markets and Household Coping Strategies in Bangladesh: Avoiding a Food Security Crisis Following the 1998 Floods," World Development, Elsevier, vol. 31(7), pages 1221-1238, July.
    7. Prema-chandra Athukorala & Budy P. Resosudarmo, 2005. "The Indian Ocean Tsunami: Economic Impact, Disaster Management and Lessons," Departmental Working Papers 2005-05, The Australian National University, Arndt-Corden Department of Economics.
    8. Beegle, Kathleen & Dehejia, Rajeev H. & Gatti, Roberta, 2006. "Child labor and agricultural shocks," Journal of Development Economics, Elsevier, vol. 81(1), pages 80-96, October.
    9. Stefan Klonner, 2008. "Private Information and Altruism in Bidding Roscas," Economic Journal, Royal Economic Society, vol. 118(528), pages 775-800, April.
    10. Eswaran, Mukesh & Kotwal, Ashok, 1989. "Credit as insurance in agrarian economies," Journal of Development Economics, Elsevier, vol. 31(1), pages 37-53, July.
    11. Gitter, Seth R. & Barham, Bradford L., 2007. "Credit, Natural Disasters, Coffee, and Educational Attainment in Rural Honduras," World Development, Elsevier, vol. 35(3), pages 498-511, March.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    market-based instruments; incomplete enforcement; environmental regulation; uncertainty;

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:gdec10:24. 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: (ZBW - German National Library of Economics). General contact details of provider: http://edirc.repec.org/data/vfselea.html .

    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.

    We have no references for this item. You can help adding them by using 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.