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Title:A whiter shade of pale: On the political economy of regulatory instruments PDF Logo
Authors:Baldursson, Fridrik M.
Fehr, Nils-Henrik M. von der
Issue Date:2004
Series/Report no.:Memorandum, Department of Economics, University of Oslo 2004,29
Abstract:We consider an intertemporal policy game between changing governments that differ in their attitudes towards a particular feature of market outcomes, exemplified with environmental pollution. When in power, a government will choose policy instruments and set strictness of regulation with a view to influencing the policy of future, possibly different, governments. We demonstrate that a ‘brown’ government favours emission quotas over effluent taxes, as quotas establish property rights that are costly to reverse. Conversely, a ‘green’ government prefers to regulate by taxes, in order to limit the incentives of future ‘brown’ governments to ease regulations. Strategic behaviour tends to exaggerate policy differences (making ‘green’ governments ‘greener’ and ‘brown’ governments ‘browner’) compared to when such strategic considerations were not an issue.
Subjects:regulation
political economy
effluent taxes
tradable quotas
property rights
commitment
environmental management
JEL:D81
H23
L51
Q28
Q38
Document Type:Working Paper
Appears in Collections:Memorandum, Department of Economics, University of Oslo

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