Policy persistence in environmental regulation |
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Affiliation: | 1. Universidad Politécnica de Madrid ETSI Caminos, Canales y Puertos, C/ Profesor Aranguren 3, 28040 Madrid, Spain;2. Complutense Institute for International Studies, Universidad Complutense de Madrid, Finca Mas Ferré, Edificio A, Campus de Somosaguas, Entrada 3, Pozuelo de Alarcón, 28223 Madrid, Spain |
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Abstract: | We study the optimal emission standards under uncertain pollution damages and transaction costs associated with policy changes in a dynamic setting. We consider three alternative forms of transactions costs and show that they can lead to different kinds of delays of policy changes or smaller scales of these changes. Thus, policy persistence can be a rational response of forward-looking policy makers to future transaction costs, rather than an inefficient outcome of the current political process. |
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