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Environmental Policy and the Size Distribution of Firms

Author

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  • Coria, Jessica

    (Department of Economics, School of Business, Economics and Law, Göteborg University)

  • Kyriakopoulou, Efthymia

    (Department of Economics, School of Business, Economics and Law, Göteborg University)

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.

Suggested Citation

  • Coria, Jessica & Kyriakopoulou, Efthymia, 2015. "Environmental Policy and the Size Distribution of Firms," Working Papers in Economics 614, University of Gothenburg, Department of Economics.
    • Handle: RePEc:hhs:gunwpe:0614
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    File URL: https://gupea.ub.gu.se/handle/2077/38326
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    References listed on IDEAS

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    More about this item

    Keywords

    Environmental regulations; energy efficiency; size distribution; emission taxes; emission standards; performance standards;
    All these keywords.

    JEL classification:

    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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