Implications of nonlinearity in environmental instrument choice

Kathy Paulson-Gjerde () and Peter Grossman ()
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Kathy Paulson-Gjerde: Butler University
Peter Grossman: Butler University

Economics Bulletin, 2015, vol. 35, issue 4, 2252-2257

Abstract: The classic paper by Weitzman (1974) on environmental instrument choice showed that relative efficiency of a price or quantity instrument depended on the elasticities of the marginal cost and benefit functions. Linear models with additive or multiplicative errors lent support for many of Weitzman's results. This paper investigates nonlinear functions and again shows Weitzman largely correct. Moreover it supports a conjecture he made about the relative efficacy of price versus quantity instruments.

Keywords: Environmental Instrument choice; nonlinearity (search for similar items in EconPapers)
JEL-codes: Q5 (search for similar items in EconPapers)
Date: 2015-10-16
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