publication . Other literature type . Article . 1978

Firm behavior under imperfectly enforceable pollution standards and taxes

Jon D Harford;
  • Published: 01 Mar 1978
  • Publisher: Elsevier BV
Abstract Assuming expected profit maximization, the behavior of the firm under imperfectly enforceable pollution standards is examined. Among other results, it is found that cost subsidies can reduce the size of violation and amount of wastes, and that the shape of the expected penalty function determines the direction of the firm response to tighter standards. Under imperfectly enforceable pollution taxes, it is found, among other results, that the firm's actual level of wastes is independent of proportional changes in the expected penalty for pollution tax evasion, and that the marginal cost of actual waste reduction equals the unit tax on reported wastes. Som...
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