Losses from effluent taxes and quotas under uncertainty |
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Authors: | William D Watson Ronald G Ridker |
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Institution: | U.S. Geological Survey, Reston, Virginia 22092, USA;The World Bank, Washington, D. C. 20433, USA |
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Abstract: | Recent theoretical papers by Adar and Griffin (J. Environ. Econ. Manag.3, 178–188 (1976)), Fishelson (J. Environ. Econ. Manag.3, 189–197 (1976)), and Weitzman (Rev. Econ. Studies41, 477–491 (1974)) show that,different expected social losses arise from using effluent taxes and quotas as alternative control instruments when marginal control costs are uncertain. Key assumptions in these analyses are linear marginal cost and benefit functions and an additive error for the marginal cost function (to reflect uncertainty). In this paper, empirically derived nonlinear functions and more realistic multiplicative error terms are used to estimate expected control and damage costs and to identify (empirically) the mix of control instruments that minimizes expected losses. |
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