A note on the measurement of agglomeration economies with compensation for urban disamenities

The net agglomeration and disamenities approaches to the measurement of agglomeration economies are merged. The net agglomeration view is represented by a labor demand function derived from Segal (D. Segal, Rev. Econ. Stat. 48, 339–350 (1976)). The disamenities view is represented by an upward-sloping labor supply function derived from Izraeli (O. Izraeli, Urban Stud. 14, 275–290 (1977)). Three cases are simulated. Case I is the benchmark case and assumes a linear homogeneous production function, no agglomeration economies, and no perceived environmental quality differences between cities. Cases II and III combine Segal and Izraeli by introducing agglomeration economies, an upward-sloping labor supply function, and a change in the level of air pollution. The results demonstrate the feasibility of isolating the output of market goods and environmental goods within a common framework.     

Transferable discharge permits and economic efficiency: The fox river

Recent emphasis on reforms of environmental regulation has led to suggestions for strategies which maintain environmental standards but allow the needed flexibility and cost effectiveness. The transferable discharge permit (TDP) is one such strategy for water pollution control recently adopted in Wisconsin. In this article, the potential for substantial cost savings from trading TDPs is demonstrated using data on the Fox River in Wisconsin. A simulation model of water quality (Qual-III) and a linear programming model of abatement costs determine the optimum pattern of discharge. Reaching that optimum from proposed pollution abatement orders is shown to be feasible. Varying conditions of flow and temperature can be accommodated using trade coefficients which can be accurately estimated through interpolation. The calculations demonstrate the value and feasibility of flexible regulations governing water pollution abatement.