Hostname: page-component-78c5997874-ndw9j Total loading time: 0 Render date: 2024-11-13T06:45:28.773Z Has data issue: false hasContentIssue false
  • English
  • Français

Cross-sectoral pollution externalities and multiple equilibria

Published online by Cambridge University Press:  21 June 2019

Larry Karp  and
Thierry Paul
Larry Karp*
Affiliation:
Department of Agricultural and Resource Economics, University of California, Berkeley, CA, USA
Thierry Paul
Affiliation:
Aix Marseille University, CNRS, Marseille, France
*
*Corresponding author. Email: [email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

In familiar models, a decrease in the friction facing mobile factors (e.g., lowering their adjustment costs) increases a coordination problem, leading to more circumstances where there are multiple equilibria. We show that a decrease in friction can decrease coordination problems when a production externality arises from a changing stock, e.g. of pollution or knowledge. In general, the relation between the amount of friction that mobile factors face and the likelihood of multiple equilibria is non-monotonic.

Keywords

coordination gamescosts of adjustmentcross-sectoral pollutionfactor reallocationlearning-by-doingintersectoral migrationmultiple equilibriaC61J21O13R23
Type
Research Article
Information
Environment and Development Economics , Volume 24 , Special Issue 6: The Economics of Climate Change and Sustainability (Part A) , December 2019 , pp. 624 - 642
Copyright
Copyright © Cambridge University Press 2019 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Benhabib, J and Farmer, R (1999) Indeterminacy and sunspots in macroeconomics. In Taylor, JB and Woodford, M (eds), Handbook of Macroeconomics, vol. 1, part A, Amsterdam: North Holland, pp. 387–448.Google Scholar
Benhabib, J, Meng, Q and Nishimura, K (2000) Indeterminacy under constant returns to scale in multisector economies. Econometrica 68, 1541–1548.Google Scholar
Brock, W and Durlauf, S (2001) Discrete choice with social interactions. Review of Economic Studies 68, 235–260.Google Scholar
Brock, W and Durlauf, S (2002) Market implications of peer and neighborhood effects. American Economic Review 92, 298–309.Google Scholar
Cooper, R and Haltiwanger, J (1996) Evidence on macroeconomic complementarities. Review of Economics and Statistics 78, 78–93.Google Scholar
Cooper, R and Johri, A (1997) Dynamic complementarities. Journal of Monetary Economics 40, 97–119.Google Scholar
Copeland, B and Taylor, M (1999) Trade, spatial separation, and the environment. Journal of International Economics 47, 137–168.Google Scholar
Davis, D and Weinstein, DE (2002) Bones, bombs and break points: the geography of economic activity. American Economic Review 92, 1269–1289.Google Scholar
Davis, D and Weinstein, DE (2004) A search for multiple equilibria in urban industrial structure. NBER Working Papers 10252, National Bureau of Economic Research, Inc.Google Scholar
Frankel, D and Pauzner, A (2000) Resolving indeterminacy in dynamic settings: the role of shocks. Quarterly Journal of Economics CXV, 285–305.Google Scholar
Fukao, K and Benabou, R (1993) History versus expectations: a comment. Quarterly Journal of Economics 108, 535–542.Google Scholar
Herrendorf, B, Valentinyi, A and Waldman, R (2000) Ruling out multiplicity and indeterminancy: the role of heterogeneity. Review of Economic Studies 67, 295–307.Google Scholar
Karp, L and Paul, T (2007) Indeterminacy with environmental and labor dynamics. Structural Change and Economic Dynamics 18, 100–119.Google Scholar
Krugman, P (1991) History versus expectations. Quarterly Journal of Economics 106, 651–667.Google Scholar
Lubik, TA and Schorfheide, R (2004) Testing for indeterminacy: an application to U.S. monetary policy. American Economic Review 94, 190–217.Google Scholar
Matsuyama, K (1991) Increasing returns, industrialization, and indeterminancy of equilibrium. Quarterly Journal of Economics 106, 587–597.Google Scholar
Matsuyama, K (1992) Agricultural productivity, comparative advantage, and economic growth. Journal of Economic Theory 58, 317–334.Google Scholar
Moro, A (2003) The effect of statistical discrimination on Black-White wage inequality: estimating a model with multiple equilibria. International Economic Review 44, 467–500.Google Scholar
Nishimura, K and Shimonura, K (2002) Indeterminacy in a dynamic small open economy. Journal of Economic Dynamics and Control 27, 271–281.Google Scholar
Wen, Y (1998a) Capacity utilization under increasing returns to scale. Journal of Economic Theory 81, 7–36.Google Scholar
Wen, Y (1998b) Indeterminacy, dynamic adjustment costs and cycles. Economics Letters 59, 213–216.Google Scholar
Supplementary material: PDF

Karp and Paul supplementary material

Karp and Paul supplementary material 1

Download Karp and Paul supplementary material(PDF)
PDF 114.6 KB