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Article
The General Equilibrium Incidence of Environmental Mandates
American Economic Journal: Economic Policy (2010)
  • Don Fullerton, University of Texas at Austin
  • Garth Heutel
Abstract
Pollution regulations affect factor demands, relative returns, production, and output prices. In our model, one sector includes pollution as an input that can be a complement or substitute for labor or capital. For each type of mandate, we find conditions where more burden is on labor or on capital. Stricter regulation does not always place less burden on the better substitute for pollution. Also, restrictions on pollution per unit output create an “output-subsidy effect” on factor prices that can reverse the usual output and substitution effects. We find analogous effects for a restriction on pollution per unit capital.
Keywords
  • environmental regulation,
  • pollution tax,
  • cap and trade
Publication Date
2010
Citation Information
Don Fullerton and Garth Heutel. "The General Equilibrium Incidence of Environmental Mandates" American Economic Journal: Economic Policy (2010)
Available at: http://works.bepress.com/don_fullerton/27/