TY  - JOUR
AU  - Markusen,James R.
AU  - Morey,Edward R.
AU  - Olewiler,Nancy
TI  - Environmental Policy When Market Structure and Plant Locations are Endo-genous
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 3671
PY  - 1991
Y2  - April 1991
UR  - http://www.nber.org/papers/w3671
L1  - http://www.nber.org/papers/w3671.pdf
N1  - Author contact info:
James R. Markusen
Department of Economics
University of Colorado
Boulder, CO 80309-0256
Tel: 303/492-0748
Fax: 303/492-8960
E-Mail: james.markusen@colorado.edu
AB  - A two-region, two-firm model is developed in which firms choose the number and the regional locations of their plants. Both firms pollute and, in this context, market structure is endogenous to environmental policy. There are increasing returns at the plant level, imperfect competition between the "home" and the "foreign" firm, and transport costs between the two markets. These features imply that at critical levels of environmental policy variables, small policy changes cause large discrete jumps in a region's pollution and welfare as a firm closes or opens a plant, or shifts production for the foreign region from/to the home-region plant to/from a foreign branch plant. The implications for optimal environmental policy differ significantly from those suggested by traditional Pigouvian marginal analysis.
ER  -