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Cross-sectoral pollution externalities and multiple equilibria
Published online by Cambridge University Press: 21 June 2019
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
- 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
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