 Can decentralized planning really achieve first-best in the presence of environmental spillovers?Harrison Fell and Daniel Kaffine Journal of Environmental Economics and Management, 2014, vol. 68, issue 1, 46-53 Abstract: It is generally accepted that decentralized policy choice in the presence of interjurisdictional spillovers is inefficient. Strikingly, Ogawa and Wildasin (2009) find that in a model with heterogenous jurisdictions, interjurisdictional capital flows, and interjurisdictional environmental damage spillovers, decentralized planning outcomes are equivalent to that under a centralized planner. We first show the critical importance of two key assumptions (no retirement of capital, fixed environmental damages per unit of capital) in obtaining this result. Second, we consider a more general model allowing for capital retirement and abatement activities and show that the outcome of a decentralized market generally differs from the solution of a centralized planner׳s social welfare-maximizing problem. Keywords: Fiscal federalism; Environmental spillovers; Abatement; Environmental policy (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jeeman:v:68:y:2014:i:1:p:46-53 DOI: 10.1016/j.jeem.2014.04.001 Access Statistics for this article Journal of Environmental Economics and Management is currently edited by M.A. Cole, A. Lange, D.J. Phaneuf, D. Popp, M.J. Roberts, M.D. Smith, C. Timmins, Q. Weninger and A.J. Yates More articles in Journal of Environmental Economics and Management from Elsevier |
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