Rent creation and rent seeking in environmental policy
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Rents and political motives are present in many aspects of public policy. This article considers the role of rents, rent seeking, and the political choice of environmental policy. Rents are introduced into the political choice of price and quantity regulation under conditions of uncertainty. The model shows how political-economy aspects affect the choice between price and quantity regulation. The contesting of rents associated with different policies affects the regulatory structure and influences the political choice of an environmental policy target. The primary conclusion is that the political choice of environmental policy depends on the interaction between the efficiency of rent transfer and the size of rent-seeking groups within the economy.
KeywordsPrices Quantities Rent seeking
JEL ClassificationD72 D81 Q52 Q58
The author is grateful to an anonymous reviewer and the Editor for helpful comments and suggestions that improved this article. We would also like to thank Lana Friesen, Arye Hillman, Randall Walsh, as well as seminar participants at the Australasian Public Choice Conference (2015) and the University of Tasmania. All errors and shortcomings are my own.
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