Location Choice by Households and Polluting Firms: An Evolutionary Approach

GEP Research Paper No. 02/27; CentER Discussion Paper No. 2004-61

34 Pages Posted: 16 Jul 2003

See all articles by Bouwe Dijkstra

Bouwe Dijkstra

University of Nottingham - School of Economics

Frans P. de Vries

affiliation not provided to SSRN

Date Written: May 2004

Abstract

This paper examines several policy regimes to deal with the problem that households suffer from environmental damage by firms in the same region. Taxation gives firms and households an incentive to stay away from each other. Laissez faire (compensation) only gives households (firms) an incentive to stay away from firms (households). We employ an evolutionary framework to analyze migration movements in the course of time, since firms and households will not relocate immediately in response to payoff differentials. We find that taxation creates the right incentives to reach a local welfare maximum. However, compensation may lead to a better outcome than taxation.

JEL Classification: Q28, R20, R30

Suggested Citation

Dijkstra, Bouwe and de Vries, Frans P., Location Choice by Households and Polluting Firms: An Evolutionary Approach (May 2004). GEP Research Paper No. 02/27; CentER Discussion Paper No. 2004-61. Available at SSRN: https://ssrn.com/abstract=411901 or http://dx.doi.org/10.2139/ssrn.411901

Bouwe Dijkstra (Contact Author)

University of Nottingham - School of Economics ( email )

University Park
Nottingham, NG7 2RD
United Kingdom
+44 115 8467205 (Phone)
+44 115 9514159 (Fax)

Frans P. De Vries

affiliation not provided to SSRN ( email )

No Address Available

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