Scandinavian Working Papers in Economics
Working Papers in Economics,
University of Gothenburg, Department of Economics
No 614: Environmental Policy and the Size Distribution of Firms
Jessica Coria () and Efthymia Kyriakopoulou ()
Additional contact information
Jessica Coria: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: P.O. Box 640, SE 40530 Gothenburg, Sweden
Efthymia Kyriakopoulou: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: P.O.Box 640, SE 40530 Gothenburg, Sweden
Abstract: In this paper we analyze the e¤ects of environmental policies on the size distribution of firms. We model a stationary industry where the observed size distribution is a solution to the profit maximization problem of heterogeneous firms that di¤er in terms of their energy efficiency. We compare the equilibrium size distribution under emission taxes, uniform emission standards, and performance standards. Our results indicate that, unlike emission taxes and performance standards, emission standards introduce regulatory asymmetries favoring small firms. These asymmetries cause significant detrimental effects on total output and total welfare, yet lead to reduced emissions and help preserve small businesses.
Keywords: Environmental regulations; energy efficiency; size distribution; emission taxes; emission standards; performance standards
34 pages, February 2015
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