Abstract
We study a model of a firm whose pollution emissions are affected both by output and by workers` efforts to avoid pollution, and which pays efficiency wages due to worker moral hazard. We show that the optimal unit pollution tax facing the firm often should be set above the standard Pigouvian tax, always at a first-best in combination with an output subsidy, and often at second-best solutions (where no output subsidies are allowed), given that the government has a premium on own revenues. With no such premium the second-best optimal tax may be lower or higher than the Pigouvian tax, depending on the relationship between total labor inputs and pollution. When the firm would choose not to operate given an ``optimal`` pollution tax, the tax should be set lower and be combined with a pollution quota in excess of the first-best level. 4 refs.
Citation Formats
Strand, J.
Environmental policy under worker moral hazard.
Norway: N. p.,
1992.
Web.
Strand, J.
Environmental policy under worker moral hazard.
Norway.
Strand, J.
1992.
"Environmental policy under worker moral hazard."
Norway.
@misc{etde_10148271,
title = {Environmental policy under worker moral hazard}
author = {Strand, J}
abstractNote = {We study a model of a firm whose pollution emissions are affected both by output and by workers` efforts to avoid pollution, and which pays efficiency wages due to worker moral hazard. We show that the optimal unit pollution tax facing the firm often should be set above the standard Pigouvian tax, always at a first-best in combination with an output subsidy, and often at second-best solutions (where no output subsidies are allowed), given that the government has a premium on own revenues. With no such premium the second-best optimal tax may be lower or higher than the Pigouvian tax, depending on the relationship between total labor inputs and pollution. When the firm would choose not to operate given an ``optimal`` pollution tax, the tax should be set lower and be combined with a pollution quota in excess of the first-best level. 4 refs.}
place = {Norway}
year = {1992}
month = {Nov}
}
title = {Environmental policy under worker moral hazard}
author = {Strand, J}
abstractNote = {We study a model of a firm whose pollution emissions are affected both by output and by workers` efforts to avoid pollution, and which pays efficiency wages due to worker moral hazard. We show that the optimal unit pollution tax facing the firm often should be set above the standard Pigouvian tax, always at a first-best in combination with an output subsidy, and often at second-best solutions (where no output subsidies are allowed), given that the government has a premium on own revenues. With no such premium the second-best optimal tax may be lower or higher than the Pigouvian tax, depending on the relationship between total labor inputs and pollution. When the firm would choose not to operate given an ``optimal`` pollution tax, the tax should be set lower and be combined with a pollution quota in excess of the first-best level. 4 refs.}
place = {Norway}
year = {1992}
month = {Nov}
}