Environmental Policy When Market Structure and Plant Locations are Endo-genous

James Markusen, Edward Morey () and Nancy Olewiler

No 3671, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: A two-region, two-firm model is developed in which firms choose the number and the regional locations of their plants. Both firms pollute and, in this context, market structure is endogenous to environmental policy. There are increasing returns at the plant level, imperfect competition between the "home" and the "foreign" firm, and transport costs between the two markets. These features imply that at critical levels of environmental policy variables, small policy changes cause large discrete jumps in a region's pollution and welfare as a firm closes or opens a plant, or shifts production for the foreign region from/to the home-region plant to/from a foreign branch plant. The implications for optimal environmental policy differ significantly from those suggested by traditional Pigouvian marginal analysis.

Date: 1991-04
Note: ITI IFM
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Citations: View citations in EconPapers (4)

Published as Journal of Environmental Economics and Management, vol. 24, 1993, p. 69-86

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Related works:
Journal Article: Environmental Policy when Market Structure and Plant Locations Are Endogenous (1993)
Working Paper: ENVIRONMENTAL POLICY WHEN MARKET STRUCTURE AND PLANT LOCATIONS ARE ENDOGENOUS (1990)
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