Cross-sectoral pollution externalities and multiple equilibria

Larry Karp and Thierry Paul ()
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Thierry Paul: AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique

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Abstract: In familiar models, a decrease in the friction facing mobile factors (e.g., lowering their adjustment costs) increases a coordination problem, leading to more circumstances where there are multiple equilibria. We show that a decrease in friction can decrease coordination problems when a production externality arises from a changing stock, e.g. of pollution or knowledge. In general, the relation between the amount of friction that mobile factors face and the likelihood of multiple equilibria is non-monotonic.

Keywords: costs of adjustment; multiple equilibria; factor reallocation; intersectoral migration; learning-by-doing; coordination games; cross-sectoral pollution (search for similar items in EconPapers)
Date: 2019-12
New Economics Papers: this item is included in nep-env
Note: View the original document on HAL open archive server: https://amu.hal.science/hal-02469871v1
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Published in Environment and Development Economics, 2019, 24 (6), pp.624-642. ⟨10.1017/S1355770X19000147⟩

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Journal Article: Cross-sectoral pollution externalities and multiple equilibria (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02469871

DOI: 10.1017/S1355770X19000147

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