ENVIRONMENTAL REGULATION AND THE OPTIMAL LOCATION OF THE FIRM UNDER UNCERTAINTY

This paper examines the optimal location of a competitive firm in response to environmental costs imposed by the abatement investment and taxes when the cost of the environmental regulation varies spatially under uncertainty. It contributes to the literature by incorporating the spatial setting into a risk-averse firm's location decisions in the presence of environmental regulation uncertainty. An increase in the cost of the environmental regulation moves a risk-averse firm closer to the output market. An augmented input or emission tax causes the risk-averse firm to locate closer to the output market. Uncertainty about environmental regulations in the form of the abatement investment and taxes also leads a risk-averse firm to locate closer to the output market, while it does not affect a risk-neutral firm's location decisions. The results have implications for the design and implementations of environmental and other development-related policies.


Issue Date:
2003
Publication Type:
Conference Paper/ Presentation
PURL Identifier:
http://purl.umn.edu/22066
Total Pages:
25
JEL Codes:
D81; R38; Q28.
Series Statement:
Selected Paper




 Record created 2017-04-01, last modified 2017-08-24

Fulltext:
Download fulltext
PDF

Rate this document:

Rate this document:
1
2
3
 
(Not yet reviewed)