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Environmental regulations and managerial myopia


Schmutzler, Armin (2001). Environmental regulations and managerial myopia. Environmental and Resource Economics, 18(1):87-100.

Abstract

It has recently been claimed that, contrary to traditional neoclassical theory, suitably chosen environmental regulation is often beneficial for the regulated firms because it induces cost-reducing innovations. I analyze the extent to which this position is compatible with microeconomic analysis. It turns out that even in a framework in which organizational inefficiencies might lead to underinvestment, environmental policy can only increase firm profits if several very specific conditions are met. These conditions concern the type of policy, the extent of inefficiencies, the costs of potential innovation projects and their effect on productivity and abatement costs.

Abstract

It has recently been claimed that, contrary to traditional neoclassical theory, suitably chosen environmental regulation is often beneficial for the regulated firms because it induces cost-reducing innovations. I analyze the extent to which this position is compatible with microeconomic analysis. It turns out that even in a framework in which organizational inefficiencies might lead to underinvestment, environmental policy can only increase firm profits if several very specific conditions are met. These conditions concern the type of policy, the extent of inefficiencies, the costs of potential innovation projects and their effect on productivity and abatement costs.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Language:English
Date:2001
Deposited On:11 Feb 2008 12:21
Last Modified:05 Apr 2016 12:17
Publisher:Springer
ISSN:0924-6460
Additional Information:The original publication is available at www.springerlink.com.
Publisher DOI:https://doi.org/10.1023/A:1011113106055

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