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TRANSACTION COSTS, ECONOMIC INSTRUMENTS AND ENVIRONMENTAL POLICIES

Deepananda P.B. Herath and Alfons Weersink

No 21588, 1999 Annual meeting, August 8-11, Nashville, TN from American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association)

Abstract: This study has attempted to distinguish the alternative forms of transaction costs referred to the environmental policy literature and to bring these transaction costs into a unified theory. The optimal choice of economic instrument between Pigouvian taxes and tradable permits is shown to depend on the level of transaction costs as opposed to the standard model where both emission taxes and permits are first best policies to achieve a level of emissions. It is demonstrated that inclusion of transaction costs decreases the socially optimal emission level as compared to the standard model. Instrument selection is affected by the functional specification for instrument costs for both firm and regulator level. Depending on the nature of these costs optimal economic instruments will be different.

Keywords: Environmental Economics and Policy; Industrial Organization (search for similar items in EconPapers)
Pages: 15
Date: 1999
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea99:21588

DOI: 10.22004/ag.econ.21588

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