Reference : Environmental Policy and the Size Distribution of Firms
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Business & economic sciences : Microeconomics
Environmental Policy and the Size Distribution of Firms
Coria, Jessica []
Kyriakopoulou, Efthymia mailto [University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Center for Research in Economic Analysis (CREA) >]
[en] environmental regulations ; energy efficiency ; size distribution
[en] In this paper we analyze the e¤ects of environmental policies on the size distribution of firms. We model a stationary industry where the observed size distribution is a solution to the profit maximization problem of heterogeneous firms that di¤er in terms of their energy e¢ ciency. We
compare the equilibrium size distribution under emission taxes, uniform emission standards, and
performance standards. Our results indicate that, unlike emission taxes and performance standards, emission standards introduce regulatory asymmetries favoring small firms. These asymmetries cause significant detrimental e¤ects on total output and total welfare, yet lead to reduced emissions and might help preserve small businesses.

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