Journal
AMERICAN JOURNAL OF AGRICULTURAL ECONOMICS
Volume 90, Issue 4, Pages 1059-1073Publisher
BLACKWELL PUBLISHING
DOI: 10.1111/j.1467-8276.2008.01168.x
Keywords
differentiated policies; two-stage optimal control; uniform policies; welfare
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Funding
- Ministerio de Ciencia y Tecnologia [AGL 2007-65548]
- INIA [SUM 2006-00019-C02-01, RTA04-141-C2-2]
- Generalitat de Catalunya [2005SGR213]
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We derive optimal input taxes to control stock pollution problems generated by heterogeneous agents. The taxes vary over time and in response to differences of asset quality and technology choice. We also derive second-best policies and compare them to the efficient policy and also among themselves. Different policies will affect the timing for when, and the extent to which, conservation technologies are adopted. A numerical example, based on the California drainage problem, shows significant efficiency gains from the optimal policy compared to no intervention, but much of the gains are lost with second-best interventions. The gains from optimal policies do not always increase with the degree of heterogeneity.
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