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Hold-up Problems with Respect to R&D Investment and Licensing in Environmental Regulation

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  • Breitscheidel, Jörg
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    Abstract

    We explore the design of self-financing tax-subsidy schemes to solve hold-up problems in environmental regulation. The announcement of the tax rate seems to be preferable to solve hold-up problems with respect to the investment in environmental R&D. In contrast, only the announcement of the subsidy rate is adequate to solve hold-up problems with respect to the licensing of environmentally friendly technologies. Altogether, the announcement of the subsidy rate yields higher expected social welfare than the announcement of the tax rate or the standard emission taxation if the marginal damage of emissions exceeds a certain level.

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    Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 05-86.

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    Date of creation: 2005
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    Handle: RePEc:zbw:zewdip:4569
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    Keywords: Hold-up problems; Environmental regulation; Taxes and subsidies; Selffinancing mechanisms; Emission control;

    Find related papers by JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
    • D62 - Microeconomics - - Welfare Economics - - - Externalities

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    16. Staiger, Robert W & Tabellini, Guido, 1987. "Discretionary Trade Policy and Excessive Protection," American Economic Review, American Economic Association, vol. 77(5), pages 823-37, December.
    17. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
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