Environmental Policy and the Size Distribution of Firms

Jessica Coria and Efthymia Kyriakopoulou ()

No 614, Working Papers in Economics from University of Gothenburg, Department of Economics

Abstract: In this paper we analyze the e¤ects of environmental policies on the size distribution of firms. We model a stationary industry where the observed size distribution is a solution to the profit maximization problem of heterogeneous firms that di¤er in terms of their energy efficiency. We compare the equilibrium size distribution under emission taxes, uniform emission standards, and performance standards. Our results indicate that, unlike emission taxes and performance standards, emission standards introduce regulatory asymmetries favoring small firms. These asymmetries cause significant detrimental effects on total output and total welfare, yet lead to reduced emissions and help preserve small businesses.

Keywords: Environmental regulations; energy efficiency; size distribution; emission taxes; emission standards; performance standards (search for similar items in EconPapers)
JEL-codes: L25 Q55 Q58 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2015-02
New Economics Papers: this item is included in nep-eff, nep-ene, nep-env and nep-res
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