Premium
THE CONTROL OF EXTERNALITIES IN A GROWING URBAN ECONOMY
Author(s) -
BUTLER RICHARD V.,
MAHER MICHAEL D.
Publication year - 1982
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.1982.tb01148.x
Subject(s) - economics , externality , welfare , marginal cost , control (management) , microeconomics , fixed cost , natural resource economics , market economy , management
The received theory of externality control, which implicitly assumes that both the social marginal damage and marginal treatment cost schedules will remain fixed during the time any policy is operative, concludes that an effluent tax and an auction of rights to emit pollutants in the amount of a given emissions standard will be equally efficient in meeting that standard. We show that urban growth causes shifts in both schedules. These shifts in turn substantially increase the welfare loss from a fixed effluent tax relative to that from an auction market with a fixed number of licenses.