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Environmental liability law and R&D subsidies: results on the screening of firms and the use of uniform policy

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  • Alfred Endres
  • Tim Friehe
  • Bianca Rundshagen

Abstract

This paper analyzes both R&D in pollution control technology and pollution abatement by firms that are subject to environmental liability law (either strict liability or negligence) and are granted R&D subsidies. Firms differ in their R&D costs (private information) and experience technology spillovers. Policy makers may induce first-best abatement and R&D levels despite asymmetric information by graduating policy instruments to screen firms. The chances of implementing first-best activity levels by such means differ under strict liability and negligence, and examples suggest that negligence performs better. The paper also studies the case in which uniform policy levels are imposed on heterogeneous firms, showing that strict liability tends to outperform negligence from a social welfare perspective in this scenario. Copyright Society for Environmental Economics and Policy Studies and Springer Japan 2015

Suggested Citation

  • Alfred Endres & Tim Friehe & Bianca Rundshagen, 2015. "Environmental liability law and R&D subsidies: results on the screening of firms and the use of uniform policy," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 17(4), pages 521-541, October.
    • Handle: RePEc:spr:envpol:v:17:y:2015:i:4:p:521-541
    DOI: 10.1007/s10018-015-0103-8
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