Discharge Taxes When Regulatory Jurisdiction Is Incomplete: A Simple Application of the Theory of the Second Best

Anthony Heyes

Scottish Journal of Political Economy, 1994, vol. 41, issue 3, 278-85

Abstract: In a simple duopoly setting, the author shows that the imposition of a discharge tax that can only be enforced on one of the firms may increase industry discharges. Thus, if the regulator cannot collect such a tax universally because some firms lie outside his nominal jurisdiction or some firms are 'uninspectable' and, hence, lie outside his de facto jurisdiction, then collecting it from the subset of firms from which it can be collected will not necessarily constitute a step in the right direction. Copyright 1994 by Scottish Economic Society.

Date: 1994
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Scottish Journal of Political Economy is currently edited by Tim Barmby, Andrew Hughes-Hallett and Campbell Leith

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