Taxing Pollutuion: Agglomeration and Welfare Consequences

Konferenzbeitrag

This paper demonstrates that a pollution tax with a fixed cost component may lead, by itself, to segregation between clean and dirty firms without heterogeneous preferences or increasing returns. We construct a simple model with two locations and two industries (clean and dirty) where pollution is a by-product of dirty good manufacturing. Under proper assumptions, a completely stratified configuration with all dirty firms clustering in one city emerges as the only equilibrium outcome when there is a fixed cost component of the pollution tax. Moreover, a stratified Pareto optimum can never be supported by a competitive spatial equilibrium with a linear pollution tax. To support such a stratified Pareto optimum, however, an effective but unconventional policy pre-scription is to redistribute the pollution tax revenue from the dirty to the clean city residents.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: 52nd Congress of the European Regional Science Association: "Regions in Motion - Breaking the Path", 21-25 August 2012, Bratislava, Slovakia

Classification and Topics

• Classification: Wirtschaft ; Externalities ; Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies ; General Equilibrium and Welfare Economic Analysis of Regional Economies
• Subject: Pollution Tax ; Agglomeration of Polluting Producers ; Endogenous Stratification

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Berliant, Marcus ; Peng, Shin-Kun ; Wang, Ping
• Event: Veröffentlichung
• (who): European Regional Science Association (ERSA)
• (where): Louvain-la-Neuve
• (when): 2012

Further information

• Handle: http://hdl.handle.net/10419/120473
• Last update: 10.03.2025, 11:44 AM CET