A Stochastic Optimal Control Model of Pollution Abatement

Arbeitspapier

We model a dynamic monopoly with environmental externalities,investigating the adoption of a tax levied on the firm's instantaneous contribution to the accumulation of pollution. The latter process is subject to a shock, which is i.i.d. across instants. We prove the existence of an optimal tax rate such that the monopoly replicates the same steady state welfare level as under social planning. Yet, the corresponding output level, R&D investment for environmental friendly technologies and surplus distribution necessarily differ from the socially optimal ones.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Quaderni - Working Paper DSE ; No. 681

Classification and Topics

• Classification: Wirtschaft ; Optimization Techniques; Programming Models; Dynamic Analysis ; Taxation and Subsidies: Efficiency; Optimal Taxation ; Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies ; Pollution Control Adoption and Costs; Distributional Effects; Employment Effects

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Dragone, Davide ; Lambertini, Luca ; Leitmann, George ; Palestini, Arsen
• Event: Veröffentlichung
• (who): Alma Mater Studiorum - Università di Bologna, Dipartimento di Scienze Economiche (DSE)
• (where): Bologna
• (when): 2009

Further information

• DOI: doi:10.6092/unibo/amsacta/4563
• Handle: http://hdl.handle.net/10419/159522
• Last update: 10.03.2025, 11:42 AM CET