Corrective Taxes under Oligopoly with Inter-Firm Externalities

Xiangkang Yin

Environmental & Resource Economics, 2003, vol. 26, issue 2, 269-277

Abstract: Pollution externalities between polluters should be taken into account in the design of corrective taxes. When the externalities are substantial and/or the number of polluters is large, the effluent levies on these firms do not necessarily result in a deadweight loss. Consequently, the second-best tax exceeds the marginal social cost of pollution. A more general rule is that the tax rate should be greater than the marginal social cost of pollution if and only if a marginal increase in the tax rate results in opposite effects on the changes of equilibrium emission level and output. Copyright Kluwer Academic Publishers 2003

Keywords: corrective tax; inter-firm externality; oligopoly (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (21)

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DOI: 10.1023/A:1026360104591

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