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Investment subsidies and time-consistent environmental policy

By Lisandro Abrego and Carlo Perroni


We describe a model of dynamic poluution abatement choices with heterogeneous agents, where, due to the presence of a distributional objective and to the absence of incentive-compatible compensation mechanisms, the choice of a second-best level of emission taxation is time-inconsistent. In this model, we investigate whether investment subsidies can act as a substitute for policy commitment

Topics: HJ
Publisher: University of Warwick, Department of Economics
Year: 1999
OAI identifier: oai:wrap.warwick.ac.uk:1646

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