Policy Persistence in Environmental Regulation

Jinhua Zhao, Catherine L. Kling
August 2000  [00-WP 257]

This paper is a study of the optimal emission standards under uncertain pollution damages and transaction costs associated with policy changes. The authors show that, in many situations, either policy changes should be avoided or they should be reduced in scale due to the presence of future transaction costs. Under this constraint, policy persistence can be viewed as the rational response of forward-looking policy makers to future transaction costs, and not just the passive outcome of the current political process.

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