community based tradable permits for localized pollution this paper considers the assignment of tradable permits representing property rights of an environmental good to community members who are harmed by pollution generated by firms these community members can in turn sell permits to polluters according to their personal preferences for a special case with a sole household market transactions between the household and polluters achieve an efficient pollution level however for a group of households the decentralized market solution fails to yield social efficiency because of competitive consumption of the environmental goods we design a revenue sharing mechanism akin to unitization under which market transactions also achieve efficient resource allocation importantly in some cases efficiency can be achieved even when regulators are ignorant of the private valuation of the environmental good

effluent regulation and long run optimality a regulator faced with free entry of firms is concerned not only with the implications of public policy for the discharges from a representative firm but also with the total pollution observed at the long run market equilibrium the regulator must take into account not only the effects of regulations upon the net marginal returns of the firm but must also consider the total profit of the firm and incentives for entry and exit this paper shows that effluent charges and tradeable effluent permits lead to long run optimality with entry of small firms the difference between firm payments and environmental damages is interpreted as the rent accruing to the environmental resource this result applies only to the competitive case with small polluters the analysis presented here allows a comparison and clarification of the literature on small and large polluters in a multi input framework with social damages dependent upon total effluents effluent charges are shown here to result in socially optimal entry confirming an assertion of baumol and oates 2 p 179 fn 161 and the important result of schulze and d arge 15 by taking average as well as marginal damages into account the effluent charge results in optimal firm scale levels and the correct input mix at the free entry market equilibrium the firm subject to an effluent tax will operate above or below the private minimum efficient scale depending upon whether average external costs exceed or are less than marginal external costs since public policy to reduce effluents is often directed at reducing the effluentgenerating activity some policy recommendations include a tax on the final output of the polluting firm in some theoretical analyses a relation between the output of the firm and the effluent level is identified and a pigouvian output tax is applied this approach should not be followed by policymakers since an output tax does not provide firms with the correct incentives for either input substitution or market entry it is shown that while a lump sum transfer is needed to provide correct entry incentives when a pigouvian output tax is applied no such transfer is needed if the tax is correctly applied to effluents contrary to 5 even if optimal firm scale and i thank the referees for helpful suggestions the support of the national science foundation under grant ses 82 19121 is gratefully acknowledged any errors are my responsibility 103

avoiding an ecological regime shift is sound economic policy we extend the shallow lake model by adding the capital stock of an industry a government can mitigate the effects of pollution arising from industrial activities by imposing the requirement to abate emissions within this framework two scenarios are examined in the social optimal benchmark the social planner optimally allocates investment in the competitive equilibrium market forces determine the investment in capital but the government can still abate emissions we find that irreversible environmental regime shifts are avoided in the competitive equilibrium by means of a static level of abatement when it is socially optimal to do so

peer pressure and partnerships partnerships and profit sharing are often claimed to motivate workers by giving them a share of the pie but in organizations of any significant size the free rider effects would seem to choke off

designing economic instruments for the environment in a decentralized fiscal system designing economic instruments for the environment when external effects are important markets will be inefficient and economists have considered several broad classes of economic instruments to correct these inefficiencies however the standard economic analysis has tended to neglect important distinctions and interactions between the geographic scope of pollutants the enforcement authority of various levels of government and the fiscal responsibilities of the levels of government for example externalities generated in a particular local area may be confined to the local area or may spill over to other jurisdictions also local governments may be well informed about how best to regulate or enforce pollution control within their jurisdiction but they may not consider the effects of their actions on other jurisdictions finally the existence of locally generated waste emissions affects the appropriate assignment of both expenditure and tax responsibilities among levels of government the standard analysis therefore focuses mainly upon an aggregate or national perspective it typically ignores the possibility that the externality may be created and addressed by local governments and it does not consider the implications of decentralization for the design of economic instruments targeted at environmental problems this paper examines the implications of decentralization for the design of corrective policies that is how does one design economic instruments in a decentralized fiscal system in which externalities exist at the local level and in which subnational governments have the power to provide local public services as well as to choose tax instruments that can both finance these expenditures and correct the market failures of externalities

externalities a market model failure we focus here on a set of conceptual problems related to the accepted theory of externalities we are primarily concerned with difficulties that arise when a theoretical system is extended beyond its logical domain this is the practice in externality theory when the market model assuming independent agents is used to analyze physical interdependency the different kinds of dependencies obscure the standard use of the paretian analysis as the issues of rights and efficiency are mixed up the creation of emissions and the creation of externalities are further not held apart producing flows in the efficiency evaluations due to the interdependencies involved actions of both emitter and victim must be taken into account while searching for efficient policies finally we analyze the interrelationships between what is termed the internal structure of the market model and the annexed sphere of externalities we conclude that the accepted policy prescriptions both assume and demand no interrelationships between these two spheres we find the assumption unrealistic and inconsistent as concerns the basic foundations of the market model there are two main traditions addressing externalities the coasean and the pigovian this paper shows that both are vulnerable to the above critique thus the presumption that externality theory is now settled and coherent is seen to be without theoretical support

pigovian taxes which work in the small number case abstract an appropriately conceived pollution tax can achieve a pareto optimal equilibrium which is 1 stable in the presence of myopia 2 not subject to strategic manipulation even in the small number case and 3 resistant to inefficient cost shifting by the participants when transaction costs are low a considerable amount of confusion in the literature exists because different authors use different tax formulas often implicitly and different assumptions regarding conjectural behavior some of this confusion is cleared up by formally presenting various pigovian tax formulas explicitly considering whether there is cournot or stackleberg behavior and comparing the properties of the various configurations

fiscal federalism approach for controlling global environmental pollution this paper finds that optimal international carbon taxes are country specific and we can decompose a tax on a domestically produced carbon intensive commodity into a revenue tax a tax to control local atmospheric pollution and an international carbon tax it shows that an institutional arrangement for the world economy similar to the fiscal federalism in the federal countries can be useful to internalize the global externalities of atmospheric pollution

sharing the cost of global warming due to meteorological factors the distribution of the environmental damage due to climate change bears no relationship to that of global emissions we argue in favor of osetting this discrepancy and propose a global insurance scheme to be ncanced according to countries respon sibility for climate change because ghg decay very slowly we argue that the actual burden of global warming should be shared on the basis of cumulated emissions raher than sharing the expected costs of actual emissions as in a pigovian taxation scheme we characterize new versions of two well known cost sharing schemes by adapting the responsibility theory of bossert and fleurbaey 1996 to a context with externalities j e l classi cation d62 d63 q54

the effect of production versus consumption based emission tax under demand uncertainty abstract emission tax is an instrument widely adopted by countries and regions to incentivize emission abatement by emission intensive firms including manufacturers however policies differ in how they allocate emission responsibilities among stakeholders for example the chile emission tax directly penalizes manufacturers for the emissions they generate during their production production based emission tax whereas the sweden electricity emission tax penalizes the consumption of electricity rather than its production consumption based emission tax these two methods have potentially varying implications on manufacturers profits their emission abatement decisions as well as the resulting emission levels especially when demand uncertainty is involved in this paper we investigate the impact of the two distinct methods by studying a profit maximizing manufacturer facing stochastic demand under either production or consumption based emission tax the manufacturer s optimal decisions on its selling price production quantity and emission abatement investment are derived perhaps surprisingly we show that under either tax it is possible for an increase in the emission tax to discourage the manufacturer from investing in emission abatement the impact of tax rate abatement technology efficiency and demand uncertainty on the manufacturer s profitability and abatement decision are also studied interestingly higher demand uncertainty may motivate the manufacturer to invest more in emission abatement under production based emission tax using a numerical example of an electricity power generator we offer further insights into the comparison between the two taxes and find that there exist cases for either tax to dominate the other in terms of both profit and emissions

the economics of renewable energy support abstract this paper uses theoretical and numerical economic equilibrium models to examine optimal renewable energy re support policies for wind and solar resources in the presence of a carbon externality associated with the use of fossil fuels we emphasize three main issues for policy design the heterogeneity of intermittent natural resources budget neutral financing rules and incentives for carbon mitigation we find that differentiated subsidies for wind and solar while being optimal only yield negligible efficiency gains policies with smart financing of re subsidies which either relax budget neutrality or use polluter pays financing in the context of budget neutral schemes can however approximate socially optimal outcomes our analysis suggests that optimally designed re support policies do not necessarily have to be viewed as a costly second best option when carbon pricing is unavailable

production uncertainty and pollution there has been considerable interest in two sector models in which the production of one of the goods is subject to uncertainty the major papers in this area are by rothenberg and smith 13 batra 1 britto 3 diamond 5 mills 12 and harford and park 8 in the latest of these papers harford and park 8 41 build on a model in mills 12 to show that if constant relative risk aversion r which is mathematically analogous to the pratt arrow measure is less than exceeds or equal to unity the direction of efficient resource flow under uncertainty as compared to certainty is away from the risky sector toward the risky sector or unchanged respectively in their model as in mills 12 the preferences of consumers are represented by a community expected utility function in the present two sector model the risky sector is an industry that is adversely affected by air pollution which is a by product of production in the other industry although there is a deterministic relation between the output and emissions of the polluting stable sector the damage caused to the other sector as a result of any given level of emissions depends upon random variables such as mixing height and wind velocity and is therefore stochastic it is not intuitively obvious whether the results of harford and park 8 hold if the uncertainty in the risky sector is the consequence of production in the stable sector in fact there is substantial dissimilarity in the results if the measure of risk aversion r is less than unity the efficient direction of resource flow is generally though not always toward the risky polluted sector if r equals unity the results also differ with resources shifting under uncertainty in the direction of the risky polluted sector only if r exceeds unity are the results always the same in both models with resources flowing toward the risky sector this paper presents the marginal condition such that under uncertainty the optimal combination of outputs includes less of the stable polluting good and more of the risky pollution sensitive good than would be the case if pollution damage were anticipated with certainty if this marginal condition does not hold the risk averse community may prefer either more or less of the polluting good a narrowed interpretation of the marginal condition is then used to predict the special case in which the efficient flow of resources under uncertainty is toward the polluting sector

externality regulation and the monopoly firm abstract differences in strategic assumptions lead to predictable variations in the conclusions one may draw the formal theory of monopoly power and externalities reflects this variability in assumptions and conclusions this paper contains a unified model of monopoly power marketable product output and externality abatement

steering the climate system using inertia to lower the cost of policy common views hold that the efficient way to limit warming to a chosen level is to price carbon emissions at a rate that increases exponentially we show that this hotelling tax on carbon emissions is actually inefficient the least cost policy path takes advantage of the climate system s inertia to delay reducing emissions and allow greater cumulative emissions the efficient carbon tax follows an inverse u shaped path and grows more slowly than the hotelling tax economic models that assume exponentially increasing carbon taxes are overestimating the cost of limiting warming overestimating the efficient near term carbon tax and overvaluing technologies that mature sooner

social connections and group banking lending to the poor is expensive due to high screening monitoring and enforcement costs group lending advocates believe lenders overcome this by harnessing social connections using data from finca peru i exploit a quasi random group formation process to find evidence of peers successfully monitoring and enforcing joint liability loans individuals with stronger social connections to their fellow group members i e either living closer or being of a similar culture have higher repayment and higher savings furthermore i observe direct evidence that relationships deteriorate after default and that through successful monitoring individuals know who to punish and who not to punish after default

providing adequate economic incentives for bioenergies with co2 capture and geological storage abstract knowing that carbon capture and storage ccs could play an important role in reducing emissions it is important to have a good understanding of this role and the importance of environmental policies to support carbon capture and geological storage from bioenergies beccs to date ccs technologies are not deployed on a commercial level and policy instruments should be used to provide incentives to firms to use these technologies to reduce pollution the aim of this paper is to compare the cost efficiency of several incentive based instruments a fossil fuel tax an emissions tax a cap and trade system and a subsidy on captured emissions needed to spur the adoption of ccs and beccs using a dynamic general equilibrium model this type of model has become the standard for assessing economy wide impacts of environmental and technological policies the study shows that beccs will be deployed only if a specific subsidy per unit of biomass emissions captured with a ccs technology is available we show also that the two most cost efficient instruments for achieving a given emissions reduction target are a specific subsidy that rewards captured emissions and a carbon tax whose revenues are recycled to subsidize beccs

pigou and coase a mathematical reconciliation abstract this paper provides a rigorous statement of the coase theorem and establishes a formal equivalence between abstract allocative mechanisms attributed to coase and pigou the model proceeds from output functions that reduce to production functions in special cases thereby capturing effects that are obscured by conventional production and cost functions the model also emphasizes fundamental differences in the characteristics of inputs particularly land that are implied in the construction of externality stories finally the model embodies a clear distinction between local e g nuisance and global e g pollution externalities the coase theorem as stated is valid only in the former case

searching for the opportunity cost of an individual s time a traditional assumption made in the literature is that the value of an individual s time spent in any activity is equal to his or her wage rate this result stems from the derivation of the value of leisure time in the context of the standard labor supply model this paper pre sents some reasons why the relationship be tween the wage rate and the value of time does not hold suggestions for what to do when the relationship breaks down and the investigator needs some value to impute to the individual are given in the final section of the paper

drivers of disruption estimating the uber effect abstract a frequent belief is that the rise of so called gig work has led to the displacement of workers in a wide range of traditional jobs this paper examines the impacts of the flagship of the gig economy uber on workers employed in conventional taxi services our analysis exploits newly collected data on the staggered rollout of uber across metropolitan areas in the united states and a difference in differences design to document that incumbent taxi drivers experienced a relative earnings decline of about 10 percent subsequent to uber s entry into a new market while there are no significant effects on their labor supply additional evidence from a battery of placebo tests event study estimates and specifications using google trends data to capture differences in treatment intensity underlines these findings a triple differences design that compares changes among taxi drivers relative to bus tractor and truck drivers that were unaffected by the arrival of uber provides further supporting evidence that the diffusion of uber has reduced the earnings potential of incumbent drivers in conventional taxi services in the united states

banning the bulb institutional evolution and the phased ban of incandescent lighting in germany much academic attention has been directed at analysing energy efficiency investments through the lens of behavioural failure these studies have challenged the neoclassical framing of regulation which emphasises the efficiency benefits of price based policy underpinned by the notion of rational individual self mastery the increasing use of a regulatory ban on electric lamps in many countries is one of the most recent and high profile flash points in this dialectic of freedom versus the state in the public policy discourse this paper interrogates this debate through a study of electric lamp diffusion in germany it is argued that neoclassical theory and equilibrium analysis is inadequate as a tool for policy analysis as it takes the formation of market institutions such as existing regulations for granted further still it may be prone to encourage idealistic debates around such grand narratives which may in practice simply serve those who benefit most from the status quo instead we argue for an evolutionary approach which we suggest offers a more pragmatic framing tool which focuses on the formation of market institutions in light of shifting social norms and political goals in our case progress towards energy efficiency and environmental goals

implicit discount rates and the purchase of untried energy saving durable goods many consumers appear to rationally calculate the net worth of a household investment but a substantial minority may lack the skills or alertness to perceive an investment opportunity and initiate analysis intentions to engage in complementary activities play an important role in the investment decision

coasean bargaining in the presence of pigouvian taxation coasean arguments against the pigouvian perspective are well established a central tenet in this criticism argues that a pigouvian tax may be a source of inefficiency if parties were to bargain in the presence of a pigouvian tax allocative inefficiencies would occur the so called buchanan stubblebine turvey theorem by analyzing a coasean environment where the appropriation of property rights is costly we show coasean bargaining in the presence of a pre existing pigouvian tax may be superior this has implications for policy where dual regulatory environments exist such as regulation at the state and federal level as well as environmental liability and litigation

elements of an economic justification for municipal zoning abstract the possibility that externalities will produce a nonconvexity in the social production set limits the application of both the coase and pigou solutions for achieving an optimal allocation of land resources conditions on relative land prices are derived which indicate that external effects are strong enough to introduce a nonconvexity into the production set these conditions were not fulfilled in a sample of single family and multifamily dwellings in foster city california this does not preclude the possibility that they are fulfilled in cases of more severe external effects

peer pressure experimental evidence from restroom behavior we provide experimental evidence on the effect of peer pressure on individual behavior specifically we study the effect of being exposed to an observer in a public restroom on handwashing and urinal flushing behavior our estimates show that being exposed to an observer increases the probability of handwashing by 13 percentage points and the probability of urinal flushing by 15 percentage points given that handwashing and urinal flushing have social benefits that exceed individual benefits our findings provide support for peer pressure as an additional way of addressing the social suboptimality arising from externalities jel c91 c93

controlling the monopolistic polluter nihilism or eclecticism abstract this paper is concerned with the consequences of pollution control when the polluter is a monopolist who can choose between abating pollution by reducing output and by adopting a less polluting technology it is suggested that the risk of welfare losses resulting from control policy is lower when technology is flexible than when it is rigid nevertheless some risk does remain so the paper concludes with a discussion of the possible use of selective control instruments to keep the risk to a minimum

the value of flexible work evidence from uber drivers technology has facilitated new nontraditional work arrangements including the ride sharing company uber uber drivers provide rides anytime they choose using data on hourly earnings and driving

the inefficiency of private adaptation to pollution in the presence of endogenous market structure the paper considers an industry where production costs rise due to pollution but where this effect can be partially off set by investing in adaptation as a private good the focus is not on external effects but industries where economies of scale are introduced from adapting to pollution the structure of the resulting oligopolistic market is endogenous since the level of adaptation is chosen by the firms the analysis of externalities usually disregards defensive or adaptation measures with a few exceptions that point to considerable complications the present debate on adaptation to climate change shows the importance of understanding defensive measures i show that the market failure caused by economies of scale leads to production costs above the social optimum i e to under adapation when pollution increases adaptation only increases if demand is price inelastic otherwise welfare loss from market failure decreases with pollution the total welfare loss is only convex if demand is price inelastic and the influence of pollution on production costs is stronger than the influence of adaptation concave welfare loss has crucial implications for abatement policies

a note on externalities and taxation the purpose of this paper is to explore the distributional aspects of a tax that is imposed in order to correct the detrimental effects of a production externality in the framework of a two sector general equilibrium model we show that harberger s classic results of tax incidence may change considerably because of the presence of the externality we also show that the tax is effective in reducing the detrimental effect of the externality although the return of the taxed factor may rise relative to the return of the untaxed factors

the demand for consumption time a longitudinal perspective t he limited stock of time an individual has available and the inability to accumulate it as one does with capital makes time a scarce economic resource with competing demands for its use traditionally economists have examined the way individuals allocate time in the context of the labor leisure dichotomy time and other resources are allocated to work activities based on the estimate of the expected income earned in comparison with the opportunities forgone this consumption of time in work activities determines the supply of time available for nonwork activities and places a value on time equivalent to its use in the labor market i e the wage rate over the life cycle various events bring about changes in labor market activity altering the role and evaluation of time as an economic resource additions to an individual s stock of human capital through education on the job training and experience help to generate higher levels of productivity and wages causing the value of work time to increase as linder 1970 suggested in the harried leisure class the limited availability of time coupled with the increasing value of time spent working generates the need for a reallocation process individuals must continually transfer time among activities to achieve parity between the yield of work and consumption moreover economic development and technological advances have produced a growing list of alternative ways to use time the combination of these forces has resulted in the realization that time as a nonrenewable resource is an essential element in calculating all labor leisure decisions the basic premise of this study is that the price of time is an important determinant of consumption behavior and an integral factor in determining the life cycle patterns of labor supply and consumption nonwork time as an individual s return income from work increases with age the opportunity cost or price of time rises whenever possible the individual will attempt to substitute other less expensive resources for time such as market goods to lower the demand for and price of time the purpose of this study therefore is to determine how the demand for consumption time nonwork time is related to shifts in income subject to personal resource and market constraints the framework for analysis is based on the new home economics model of resource allocation in the first section the demand for consumption time is presented in a production function approach to consumption activities the methodology and sampling format for empirically testing the model are discussed in the second section the estimated coefficients of the model and various parameters related to the consumption of time are analyzed and summarized in the final section