Abstract
We consider one polluting industry in an open economy. The national government implements a policy of industrial pollution control, by inducing appropriate technological innovation to reduce toxic emissions. The emission-reducing innovations are developed through firm-specific costly investments. Under different hypotheses on market structure (perfect competition, Bertrand and Cournot oligopoly), international competition forces the national government to subsidize innovation. The appropriate subsidy scheme varies according to the information available to the government and according to market structure. If information is asymmetric, the subsidy must include the information premium necessary to separate different types of firms.
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Carraro, C., Siniscalco, D. Environmental innovation policy and international competition. Environmental and Resource Economics 2, 183–200 (1992). https://doi.org/10.1007/BF00338242
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DOI: https://doi.org/10.1007/BF00338242