Aspects of the Theory of Environmental Policy in Developing Countries

18 Pages Posted: 27 Aug 2001

See all articles by Amitrajeet A. Batabyal

Amitrajeet A. Batabyal

Rochester Institute of Technology (RIT) - Department of Economics

Hamid Beladi

University of Texas at San Antonio - College of Business - Department of Economics

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Abstract

We study two issues relating to the conduct of environmental policy in developing countries (DCs). First, when faced with a self-financing constraint, should an environmental authority (EA) raise/lower pollution taxes over time or should it run a deficit/surplus? Second, given recent findings about the dynamic inconsistency of optimal environmental policy, should an EA make its preferences about the relative benefits of environmental protection versus production public, or should it keep its preferences private? Our analysis reveals that when faced with a self-financing constraint, it is optimal for the EA to run a deficit/surplus. Second, social losses are lower when this EA keeps its preferences private.

Keywords: Developing Country, Dynamic Consistency, Environmental Policy, Taxation

JEL Classification: O29, Q28

Suggested Citation

Batabyal, Amitrajeet A. and Beladi, Hamid, Aspects of the Theory of Environmental Policy in Developing Countries. Available at SSRN: https://ssrn.com/abstract=281370 or http://dx.doi.org/10.2139/ssrn.281370

Amitrajeet A. Batabyal (Contact Author)

Rochester Institute of Technology (RIT) - Department of Economics ( email )

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Hamid Beladi

University of Texas at San Antonio - College of Business - Department of Economics ( email )

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