nep-res New Economics Papers
on Resource Economics
Issue of 2017‒10‒15
five papers chosen by
Maximo Rossi
Universidad de la República

  1. The Distribution of Environmental Damages By Solomon Hsiang; Paulina Oliva; Reed Walker
  2. Taxation, redistribution and observability in social dilemmas By Daniel A. Brent; Lata Gangadharan; Anca Mihut; Marie Claire Villeval
  3. Climate Policy Commitment Devices By Dengler, Sebastian; Gerlagh, Reyer; Trautmann, Stefan; van de Kuilen, Gijs
  4. Is Pollution Value-Maximizing? The DuPont Case By Roy Shapira; Luigi Zingales
  5. Pollution Meets Efficiency: Multi-equation modelling of generation of pollution and related efficiency measures* By Førsund, Finn R

  1. By: Solomon Hsiang; Paulina Oliva; Reed Walker
    Abstract: Most regulations designed to reduce environmental externalities impose costs on individuals and firms. An active body of research has explored how these costs are disproportionately born by different sectors of the economy and/or across different groups of individuals. However, much less is known about the distributional characteristics of the environmental benefits created by these policies, or conversely, the differences in environmental damages associated with existing environmental externalities. We review this burgeoning literature and develop a simple and general framework for focusing future empirical investigations. We apply our framework to findings related to the economic impact of air pollution, deforestation, and climate, highlighting important areas for future research. A recurring challenge to understanding the distributional effects of environmental damages is distinguishing between cases where (i) populations are exposed to different levels or changes in an environmental good, and (ii) where an incremental change in the environment may have very different implications for some populations. In the latter case, it is often difficult to empirically identify the underlying sources of heterogeneity in marginal damages, as damages may stem from either non-linear and/or heterogeneous damage functions. Nonetheless, understanding the determinants of heterogeneity in environmental benefits and damages is crucial for welfare analysis and policy design.
    JEL: H23 I14 Q5 Q56
    Date: 2017–09
  2. By: Daniel A. Brent (Department of Economics, Louisiana State University, Business Education Complex, Baton Rouge, LA 70803-6306, U.S.A.); Lata Gangadharan (Department of Economics, Monash University, Clayton, Australia); Anca Mihut (Univ Lyon, CNRS, GATE L-SE UMR 5824, F-69130 Ecully, France); Marie Claire Villeval (Univ Lyon, CNRS, GATE L-SE UMR 5824, F-69130 Ecully, France)
    Abstract: In the presence of social dilemmas, cooperation is more difficult to achieve when populations are heterogeneous because of conflicting interests within groups. We examine cooperation in the context of a non-linear common pool resource game, in which individuals have unequal extraction capacities and have to decide on their extraction of resources from the common pool. We introduce monetary and nonmonetary policy instruments in this environment. One instrument is based on two variants of a mechanism that taxes extraction and redistributes the tax revenue. The other instrument varies the observability of individual decisions. We find that the two tax and redistribution mechanisms reduce extraction, increase efficiency and decrease inequality within groups. The scarcity pricing mechanism, which is a per-unit tax equal to the marginal extraction externality, is more effective at reducing extraction than an increasing block tax that only taxes units extracted above the social optimum. In contrast, observability impacts only the Baseline condition by encouraging free-riding instead of creating moral pressure to cooperate.
    Keywords: Common Pool Resource game, taxation mechanisms, observability, cooperation, heterogeneity, experiment
    JEL: C92 H23 D74
    Date: 2017
  3. By: Dengler, Sebastian (Tilburg University, Center For Economic Research); Gerlagh, Reyer (Tilburg University, Center For Economic Research); Trautmann, Stefan (Tilburg University, Center For Economic Research); van de Kuilen, Gijs (Tilburg University, Center For Economic Research)
    Abstract: We develop a dynamic resource extraction game that mimics the global multi-generation planning problem for climate change and fossil fuel extraction. We implement the game under different conditions in the laboratory. Compared to a ‘libertarian’ baseline condition, we find that policy interventions that provide a costly commitment device or reduce climate threshold uncertainty reduce resource extraction. We also study two conditions to assess the underlying social preferences and the viability of ecological dictatorship. Our results suggest that climate-change policies that focus on investments that lock the economy into carbon-free energy sources provide an important commitment device in the intertemporal cooperation problem.
    Keywords: climate policy instruments; intertemporal cooperation; climate game; experiments
    JEL: C91 D62 D99 Q38 Q54
    Date: 2017
  4. By: Roy Shapira; Luigi Zingales
    Abstract: DuPont, one of the most respectable U.S. companies, caused environmental damage that ended up costing the company around a billion dollars. By using internal company documents disclosed in trials we rule out the possibilities that this bad outcome was due to ignorance, an unexpected realization, or a problem of bad governance. The documents rather suggest that the polluting was a rational decision: under reasonable probabilities of detection, polluting was ex-ante optimal from the company’s perspective, even if the cost of preventing pollution was lower than the cost of the health damages produced. We then examine why different mechanisms of control – legal liability, regulation, and reputation – all failed to deter a behavior that was inefficient from a social point of view. One common reason for the failures of deterrence mechanisms is that the company controls most of the information and its release. We then sketch potential ways to mitigate this problem.
    JEL: K32 L21 Q52
    Date: 2017–09
  5. By: Førsund, Finn R (Dept. of Economics, University of Oslo)
    Abstract: The generation of unintended residuals in the production of intended outputs is the key factor behind our serious problems with pollution. The way this joint production is modelled is therefore of crucial importance for our understanding and empirical efforts to change economic activities in order to reduce harmful residuals. The materials balance tells us that residuals stem from the use of material inputs. The modelling of joint production must therefore reflect this. A multi-equation model building on the factorially determined multi-output model of classical production theory can theoretically satisfy the materials balance. Potentially complex technical relationships are simplified to express each of the intended outputs and the unintended residuals as functions of the same set of inputs. End-of-pipe abatement activity is introduced for a production unit. Introducing direct environmental regulation of the amount of pollutants generated an optimal private solution based on profit maximisation is derived. Serious problems with the single-equation models that have dominated the literature studying efficiency of production of intended and unintended outputs the last decades are revealed. An important result is that a functional trade-off between desirable and undesirable outputs for given resources, as exhibited by single-equation models, is not compatible with the materials balance and efficiency requirements on production relations. Multi-equation models without this functional trade-off should therefore replace single equation models. Extending the chosen multi-equation model to allow for inefficiency, three efficiency measures are introduced: desirable output efficiency, residuals efficiency, and abatement efficiency. All measures can be estimated separately using the non-parametric DEA model.
    Keywords: Materials balance; Joint Production; Residuals generation; Single-equation and multi-equation models; End-of-pipe abatement; Efficiency measures; Data Envelopment Analysis (DEA)
    JEL: C51 D24 D62 Q50
    Date: 2017–09–15

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