NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Anastasios Xepapadeas

Department of Economics
University of Crete
University Campus
74 100 Rethymno GREECE
Tel: 30 831 77405
Fax: 30 831 77406

E-Mail: xepapad@aueb.gr

NBER Working Papers and Publications

January 2001Environmental Policy and Firm Behavior: Abatement Investment and Location Decisions under Uncertainty and Irreversibility
in Behavioral and Distributional Effects of Environmental Policy, Carlo Carraro and Gilbert E. Metcalf, editors
August 1999Environmental Policy and Firm Behavior: Abatement Investment and Location Decisions Under Uncertainty and Irreversibility
t0243
This paper explores abatement investment and location responses to environmental policy, which takes the form of emission taxes or tradeable emission permits and subsidies against the costs of abatement investment, under uncertainty and irreversibility. Uncertainty is associated with output price, environmental policy parameters, or technological parameters. Irreversibility is related to abatement expenses and movements to a new location. Uncertainty is modeled by Itô stochastic differential equations, and the problem is analyzed by using optimal stopping methodologies. Continuation intervals during which firms do not engage in abatement investment or relocate and intervals during which firms take the irreversible decision of undertaking abatement expenses or relocating are defined. Free...
 
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