Externality, Market Imperfection, and Optimal Environmental Policy

摘要

This dissertation consists of three chapters. The first chapter studies the effects of emission taxation on an oligopolistic industry. It shows that, in the short run with a fixed number of firms, an increase in the tax rate always lowers all firms' outputs, resulting in a contraction of the industry output. In the long run, the tax affects firms' entry and exit decisions and may yield ambiguous effects on the firms' and industry outputs. It further shows that the tax reduces the equilibrium number of firms, and also reduces the equilibrium industry output if the inverse demand function is affine, concave, or not too convex. Finally, the chapter examines the question of the optimal number of firms from the social point of view. It shows excess or insufficient entry is determined by the relationship between the social marginal benefit of production and the responses of firms' outputs to a change in the tax rate.;The second chapter focuses on the model of Kim and Chang (Journal of Regulatory Economics 1993). Their model provides a method of deriving an optimal nonlinear tax function for polluting firms in an imperfectly competitive industry under asymmetric information between firms and the regulator. They show that it is possible to devise an optimal uniform non-linear tax formula with only two pieces of information required for the regulator, i.e., the marginal damage function and the slope of the inverse demand function. This chapter examines the scope of applicability of their approach and finds it is capable of being extended to several cases. We discover two conditions which must be assumed in order to apply their model. If these conditions are not satisfied and optimal tax function cannot be guaranteed to be generated, however, the government can always resort to a unit tax rate to achieve it's objectives.;The welfare function which is standard in the literature includes consumer and producer surpluses, government revenue, and externality impact. The third chapter constructs a welfare function which includes different weights assigned to each of the welfare components to reflect either the regulator's own judgment or special interest groups' influence. In addition to a pollution externality, a consumption externality is also introduced in the model. The optimal government policies on consumption and pollution under imperfect competition are analyzed. The chapter shows that optimal tax rates are influenced significantly by the relative magnitudes of the welfare weights. It also shows that these rates can be higher (or lower) than their Pigouvian rates, even after adjusting for the market imperfection factor. Furthermore, some counter-intuitive results on the optimal tax rates may appear when the welfare weights are altered. Finally, this chapter examines various specifications of technology on output and pollution and derives the implied cost functions. This approach sheds light on the different properties the implied cost functions must possess. It reveals that the existing literature is quite lax or overly simplistic in making assumptions on the cost functions.