Certification as a Rationale for Voluntary Agreements

Patrick Gonzalez ()

Cahiers de recherche CREATE from CREATE

Abstract: I model the participation of firms in a voluntary agreement as a costly certification process whereby a firm informs the Regulator of its pollution intensity. Without this knowledge, the Regulator imposes the same tax on all firms in a heterogeneous industry, unduly hurting the clean ones with the lowest intensity. Certification allows clean firms to get a tax rebate. It also entails an informational externality as the dispersion of types decreases within the pool of non-participating firms, following an unraveling process. Because participation is a firm’s private decision, there is such a thing as a bad voluntary agreement.

Keywords: Certification; voluntary agreements; Pigovian taxes; pollution (search for similar items in EconPapers)
JEL-codes: L51 Q53 Q58 (search for similar items in EconPapers)
Date: 2011
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Working Paper: Certification as a Rationale for Voluntary Agreements (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:lvl:creacr:2011-2

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