Spreading versus Concentrating Damages: Environmental Policy in the Presence of Nonconvexities

This paper examines the role of nonconvexities in externality control from a policy perspective. Nonconvexities can arise from a number of sources and can significantly alter the optimal solution to an externality problem; for instance, it may be socially desirable to concentrate externality damages...

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Bibliographic Details
Published in:Journal of environmental economics and management 1994-07, Vol.27 (1), p.84-91
Main Authors: Helfand, Gloria E., Rubin, Jonathan
Format: Article
Language:English
Subjects:
Economic models
Economic theory
Environmental economics
Environmental policy
Environmental protection
Externalities
Externality
Policy making
Pollution
Pollution control
Public policy
Studies
Waste
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Summary:This paper examines the role of nonconvexities in externality control from a policy perspective. Nonconvexities can arise from a number of sources and can significantly alter the optimal solution to an externality problem; for instance, it may be socially desirable to concentrate externality damages in one area and prohibit them in another, rather than spread the effects of the externality across a number of sites. If this solution is optimal, a pollution tax will not achieve the social optimum, but a system of marketable permits will.
ISSN:0095-0696
1096-0449
DOI:10.1006/jeem.1994.1027