Environmental Policy When Market Structure and Plant Locations are Endo-genous / James R. Markusen, Edward R. Morey, Nancy Olewiler.

Format:

Book

Author/Creator:

Markusen, James R.

Contributor:

National Bureau of Economic Research.

Morey, Edward R.

Olewiler, Nancy.

Series:

Working Paper Series (National Bureau of Economic Research) no. w3671.

NBER working paper series no. w3671

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1991.

Summary:

A two-region, two-firm model is developed in which firms choose the number and the regional locations of their plants. Both firms pollute and, in this context, market structure is endogenous to environmental policy. There are increasing returns at the plant level, imperfect competition between the "home" and the "foreign" firm, and transport costs between the two markets. These features imply that at critical levels of environmental policy variables, small policy changes cause large discrete jumps in a region's pollution and welfare as a firm closes or opens a plant, or shifts production for the foreign region from/to the home-region plant to/from a foreign branch plant. The implications for optimal environmental policy differ significantly from those suggested by traditional Pigouvian marginal analysis.

Notes:

Print version record

April 1991.