Intra-Industry Reallocations and Long-run Impacts of Environmental Regulations

Yoshifumi Konishi and Nori Tarui

No 201307, Working Papers from University of Hawaii at Manoa, Department of Economics

Abstract: We investigate the long-run impact of environmental regulations on the intra-industry distribution of firm-level productivity and the resulting aggregate variables. In a general-equilibrium model that accounts for endogenous entry/exit of heterogeneous firms, neither the average productivity of firms nor the mass of firms is independent of the choice of policy instruments (i.e. emissions tax vs. emissions trading) or permit allocation rules. The equilibrium price of permits under emissions trading is lower than the emissions tax rate that would support the same aggregate emissions. An incomplete emissions market results in a net increase in combined aggregate emissions.

Keywords: Emissions Tax; Emissions Trading; Heterogeneous Firms; Endogenous Entry/Exit; Melitz Model; Incomplete Regulation; Emissions Leakage (search for similar items in EconPapers)
JEL-codes: Q50 Q52 Q58 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2013-05
New Economics Papers: this item is included in nep-ene, nep-env, nep-reg and nep-res
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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