Equivalence of Taxes and Subsidies in the Control of Production Externalities

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dc.contributor.authorNault, Barrie R
dc.date.accessioned2015-05-27T20:00:19Z
dc.date.available2015-05-27T20:00:19Z
dc.date.issued1996-03
dc.description*INFORMS: unless published under the open access option, the publisher will provide a specific copy of the paper that can be posted to a web page is https://www.informs.org/Find-Research-Publications/INFORMS-Journals/Rights-Permissions#work. Publisher's copy deposited according to publisher's policy 05/25/2015en_US
dc.description.abstractWe are always better off having many policies that can achieve a given objective because it extends the criteria that can be included in policy selection. This paper studies the equivalence between taxes and subsidies in the control of negative production externalities. In our models, under the tax regime, firms that take no treatment action to mitigate the damage caused by their negative externalities are punished, whereas under the subsidy regime, firms are rewarded for externality treatment activities. We employ a formulation where firms differ in the vintage of their production technology and as a result differ in profitability, negative externality generation,·and the cost of treatment. We consider three measures as policy objec­tives: total output, total damage from negative externalities, and social welfare. We find reason­ able conditions where, with an appropriate setting of uniform lump-sum and unit subsidies, the policy maker can achieve a pair of policy objectives equivalent to those obtained using unit taxes. Thus, either tax or subsidy regimes can be used to achieve desired levels of one or two policy objectives, allowing other factors such as fairness, equity, or international trade issues to be considered in policy selection.en_US
dc.identifier.citationNault, B.R., "Equivalence of Taxes and Subsidies in the Control of Production Externalities," Management Science, 42, 3 (March 1996), 307-320.en_US
dc.identifier.doihttp://dx.doi.org/10.11575/PRISM/28796
dc.identifier.issn0025-1909
dc.identifier.urihttp://hdl.handle.net/1880/50460
dc.language.isoenen_US
dc.publisherINFORMSen_US
dc.publisher.corporateUniversity of Calgaryen_US
dc.publisher.departmentManagement Information Systemsen_US
dc.publisher.facultyHaskayne School of Businessen_US
dc.publisher.institutionUniversity of Calgaryen_US
dc.subjectPublic Policyen_US
dc.subjectExternalitiesen_US
dc.subjectTaxesen_US
dc.subjectSubsidiesen_US
dc.subjectEnvironmental Policyen_US
dc.subjectSocial Welfareen_US
dc.subjectProduction Technologyen_US
dc.titleEquivalence of Taxes and Subsidies in the Control of Production Externalitiesen_US
dc.typejournal article
thesis.degree.disciplineManagement Information Systemsen_US
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