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On Efficiency of Decentralized Environmental Regulation

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Abstract

Contrary to conventional wisdom about an environmental race to the bottom, the theoretical literature as exemplified by Oates and Schwab [1988, Journal of Public Economics, 35:333–354] maintains that homogeneous jurisdictions’ decentralized choices are likely to be socially optimal because each locale sets capital tax rates to zero and sets optimal environmental standards. This paper shows the well-received Oates–Schwab-style efficiency result is not likely if allowed aggregate-emissions act as a firm-augmenting public input that benefits mobile firms.

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Authors and Affiliations

  1. Department of Economics and Finance, Department 3985, University of Wyoming, 1000 E. University Ave, Laramie, WY, 82071, USA

    Mitch Kunce & Jason F. Shogren

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  1. Mitch Kunce
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  2. Jason F. Shogren
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Correspondence to Mitch Kunce.

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Thanks to participants at the University of Alberta and the reviewers and editors for their helpful comments

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Kunce, M., Shogren, J.F. On Efficiency of Decentralized Environmental Regulation. J Regul Econ 28, 129–140 (2005). https://doi.org/10.1007/s11149-005-3105-9

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  • DOI: https://doi.org/10.1007/s11149-005-3105-9

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