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The role of taxes and zoning in the effective control of pollution

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  • Hochman, Oded
  • Rausser, Gordon C.

Abstract

Previous analysis of pollution presumes separation between pollutees and polluters. In the model developed here, all possible combinations of housing and industry locations are allowed. In the resulting world of nonconvexities and multiple local optimum, Pigouvian taxes are generally insufficient. Accordingly, our analysis considers a wide range of policy instruments extending from Pigouvian taxes, double taxes, to zoning regulations. The results demonstrate that the management of pollution requires the recognition of two separate regimes determined by the type of convexity or concavity of the pollution dispersion function. When this function is convex, the optimal solution requires no zoning of housing. When the dispersion function is concave in emissions, the optimal allocation implies zoning into industrial and residential zones and, in some circumstances, taxes equal to total damages. To achieve effective management under limited information regarding the pollution dispersion function, it is argued that zoning restrictions cab be determined by trial and error through observation of changes in land rents.

Suggested Citation

  • Hochman, Oded & Rausser, Gordon C., 1980. "The role of taxes and zoning in the effective control of pollution," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt6cs5h3fm, Department of Agricultural & Resource Economics, UC Berkeley.
    • Handle: RePEc:cdl:agrebk:qt6cs5h3fm
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    References listed on IDEAS

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    1. Strotz, Robert H. & Wright, Colin, 1975. "Spatial adaptation to urban air pollution," Journal of Urban Economics, Elsevier, vol. 2(3), pages 212-222, July.
    2. Hochman, Oded, 1981. "Land rents, optimal taxation and local fiscal independence in an economy with local public goods," Journal of Public Economics, Elsevier, vol. 15(1), pages 59-85, February.
    3. Dennis W. Carlton & Glenn C. Loury, 1980. "The Limitations of Pigouvian Taxes as a Long-Run Remedy for Externalities," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 95(3), pages 559-566.
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    9. Gould, J R, 1977. "Total Conditions in the Analysis of External Effects," Economic Journal, Royal Economic Society, vol. 87(347), pages 558-564, September.
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    12. Hochman, Oded & Ofek, Haim, 1979. "A theory of the behavior of municipal governments: The case of internalizing pollution externalities," Journal of Urban Economics, Elsevier, vol. 6(4), pages 416-431, October.
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    14. Hochman, Oded, 1978. "A two sector model with several externalities and their effects on an urban setting," Journal of Urban Economics, Elsevier, vol. 5(2), pages 198-218, April.
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