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Transaction Costs and Environmental Policy: An Assessment Framework and Literature Review

Kerry Krutilla and Rachel Krause

International Review of Environmental and Resource Economics, 2011, vol. 4, issue 3–4, 261-354

Abstract: This article develops a framework for environmental policy analysis based on an encompassing assessment of transaction costs. This approach emphasizes the ex ante costs of establishing environmental entitlements, and the ex post costs of administrating, monitoring, and enforcing them. The framework is used to organize a literature review which addresses policy design and instrument choice, as well as optimal environmental policy-making and benefit-cost analysis. The review also considers the empirical literature on transaction costs associated with environmental policy-making, and current practices to record some categories of transaction costs in regulatory impact assessments. The article concludes with a discussion of the implications for environmental policy analysis.

Keywords: Environmental policy analysis; Transaction costs; Political economy; Policy design; Instrument choice; Benefit-cost analysis (search for similar items in EconPapers)
JEL-codes: D61 H23 Q50 Q58 (search for similar items in EconPapers)
Date: 2011
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