Taxes versus quotas in lobbying by a polluting industry with private information on abatement costs

Takuro Miyamoto

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

We present a model of lobbying by a polluting industry with private information on pollution abatement costs and compare taxes with quotas under such conditions. We also examine the effect of private information on lobbying activity and social welfare under these two instruments. It is found that private information might improve social welfare under taxes when the government has little concern for social welfare, whereas private information does not improve social welfare under quotas. Quotas are generally socially preferred when the slope of marginal abatement costs is steeper than that of marginal damage or when the government does not concern itself with social welfare. However, private information reduces the comparative disadvantage of taxes compared to quotas when the government has little concern for social welfare. Finally, the results of numerical examples suggest that quotas are employed rather than taxes if the difference in natural emission levels between high- and low-cost industries is large.

Original languageEnglish
Pages (from-to)141-167
Number of pages27
JournalResource and Energy Economics
Volume38
DOIs
Publication statusPublished - 2014
Externally publishedYes

Keywords

  • Asymmetric information
  • Lobby
  • Tax versus quota

ASJC Scopus subject areas

  • Economics and Econometrics

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