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Appears in Collections:Economics Journal Articles
Peer Review Status: Refereed
Title: Location choice by households and polluting firms: An evolutionary approach
Author(s): Dijkstra, Bouwe R
de Vries, Frans
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Keywords: environmental policy
location choice
evolutionary game theory
Issue Date: Feb-2006
Date Deposited: 14-Dec-2012
Citation: Dijkstra BR & de Vries F (2006) Location choice by households and polluting firms: An evolutionary approach. European Economic Review, 50 (2), pp. 425-446.
Abstract: This paper examines several policy regimes to deal with the problem of households suffering from environmental damage by firms in the same region. We employ an evolutionary framework to analyze migration movements in the course of time, since firms and households will not relocate immediately in response to payoff differentials. We show that taxation gives firms and households an incentive to stay away from each other. Laissez faire (compensation) only gives households (firms) an incentive to stay away from firms (households). We find that taxation creates the right incentives to reach a local welfare maximum. However, when there are multiple local maxima, circumstances may arise under which compensation leads to a better outcome than taxation.
DOI Link: 10.1016/j.euroecorev.2004.09.006
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