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The B.E. Journal of Economic Analysis & Policy

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

Ed. by Barigozzi, Francesca / Brunner, Johann / Fleck, Robert / Jürges, Hendrik / Mastrobuoni, Giovanni / Mendola, Mariapia / Requate, Till / de Vries, Frans / Wenzel, Tobias

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Volume 16, Issue 4


Volume 6 (2006)

Volume 4 (2004)

Volume 2 (2002)

Volume 1 (2001)

Can Polluting Firms Favor Regulation?

Félix Muñoz-García
  • Corresponding author
  • School of Economic Sciences, Washington State University, Pullman, WA 99164, 103G Hulbert Hall, USA
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  • De Gruyter OnlineGoogle Scholar
/ Sherzod B. Akhundjanov
Published Online: 2016-07-13 | DOI: https://doi.org/10.1515/bejeap-2015-0163


This paper investigates the production decisions of firms with asymmetric environmental damages, and how their profits are affected by environmental regulation. We demonstrate that emission fees entail a negative effect on firms’ profits, since they increase unit production costs. However, fees can also produce a positive effect for a relatively inefficient firm, given that environmental regulation mitigates its cost disadvantage. If such a disadvantage is sufficiently large, we show that the positive effect dominates, thus leading this firm to actually favor the introduction of environmental policy, while the relatively efficient firm opposes regulation. Furthermore, we show that such support can originate from polluting companies.

This article offers supplementary material which is provided at the end of the article.

Keywords: cost asymmetries; cost disadvantage; emission fees; green firms

JEL Classification: L13; D62; H23; Q20


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About the article

Published Online: 2016-07-13

Published in Print: 2016-10-01

Citation Information: The B.E. Journal of Economic Analysis & Policy, Volume 16, Issue 4, 20150163, ISSN (Online) 1935-1682, ISSN (Print) 2194-6108, DOI: https://doi.org/10.1515/bejeap-2015-0163.

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