Jump to ContentJump to Main Navigation
Show Summary Details
More options …

The B.E. Journal of Economic Analysis & Policy

Editor-in-Chief: Jürges, Hendrik / Ludwig, Sandra

Ed. by Auriol , Emmanuelle / Brunner, Johann / Fleck, Robert / Mendola, Mariapia / Requate, Till / Schirle, Tammy / de Vries, Frans / Zulehner, Christine

4 Issues per year


IMPACT FACTOR 2016: 0.252
5-year IMPACT FACTOR: 0.755

CiteScore 2016: 0.48

SCImago Journal Rank (SJR) 2016: 0.330
Source Normalized Impact per Paper (SNIP) 2016: 0.526

Online
ISSN
1935-1682
See all formats and pricing
More options …
Volume 11, Issue 1 (May 2011)

Issues

Volume 6 (2006)

Volume 4 (2004)

Volume 2 (2002)

Volume 1 (2001)

A Tail-Payoff Puzzle in Dynamic Pollution Control

Antti Iho / Mitri Kitti
Published Online: 2011-05-25 | DOI: https://doi.org/10.2202/1935-1682.2752

Abstract

We analyze dynamic models with negative externalities occurring from production capital and input use. We uncover a puzzle related to such models: evaluated with a social welfare function, the steady-state outcome of a socially optimal policy, and thus the tail of the corresponding payoff sequence, may yield a smaller social payoff than a market outcome. The main questions we address are under what conditions this phenomenon arises and how general it is. We show that there are always Pareto-optimal policies which lead to the puzzle when the discount rate is fixed. In addition to discounting, the driving force of our results is that the periodic pollution and profits are linked to production capital. We demonstrate the puzzle with a model for controlling phosphorus losses from crop production. We argue that the puzzle should be taken into account in the policy analysis of dynamic problems, including negative externalities.

Keywords: dynamics of pollution control; phosphorus runoff; policy analysis; social welfare; steady state; tail payoff

About the article

Published Online: 2011-05-25


Citation Information: The B.E. Journal of Economic Analysis & Policy, ISSN (Online) 1935-1682, DOI: https://doi.org/10.2202/1935-1682.2752.

Export Citation

©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston. Copyright Clearance Center

Comments (0)

Please log in or register to comment.
Log in