ESSAYS ON ENVIRONMENTAL REGULATION AND APPLIED MICROECONOMICS

Thesis (Ph.D.), Economics, Washington State UniversityIn the first chapter, I analyze a common property resource located between two countries in the presence of two forms of bilateral externalities: the tragedy of the commons, and the environmental pollution resulting from the depletion of the resource. I show that both the non-cooperative and cooperative forms of regulation produce two distinct effects on firm profits: a negative effect, due to increase in marginal cost of production; and a positive effect, owing to the mitigation of Cournot overproduction. The magnitude of these two effects depends not only on the type of regulatory instrument, but also on the rate of resource extraction and the environmental damage in each country. I identify conditions under which the positive effect of regulation dominates its negative effect, thus increasing firm profits and incentivizing them to support the introduction of regulation. In the second chapter, I investigate the production decisions of firms with asymmetric production costs and environmental damages, and how their profits are affected by environmental regulation. I demonstrate that emission fees entail a negative effect on firms’ profits, since they increase unit production costs. However, fees can also produce a positive effect for a relatively inefficient firm, given that environmental regulation mitigates its cost disadvantage. If such a disadvantage is sufficiently large, I show that the positive effect dominates, thus leading this firm to actually favor the introduction of environmental policy, while the relatively efficient firm to oppose regulation. Furthermore, I show that such support can originate from polluting companies. In the third chapter, I examine the size distribution and the growth process of national carbon dioxide (CO2) emissions on a sample of 210 countries/territories for the period 2000-2010. The analysis demonstrates that the Pareto tails-lognormal distribution, which models lower and upper tails with Pareto and middle range with lognormal and endogenously identifies the transition points, fits the size distribution of CO2 emissions better than other distributions. The parametric analysis reveals that the upper-tail of CO2 emissions is characterized by Zipf’s law. The results from non-parametric and parametric analysis establish that the growth process of CO2 emissions follows Gibrat’s law.Washington State University, Economic