Non-cooperative pollution control in an inter-jurisdictional setting

Abstract

This paper examines various circumstances under which decentralized pollution policies can be efficient both in federal settings and in multi-region settings with labor mobility. We consider a model in which pollution control policies are set by regional governments non-cooperatively and pollution damages are borne by the residents of all regions. We characterize the efficiency of pollution policies, and of population allocation among regions, in a variety of scenarios, including when pollution policies are enacted before interregional transfers are determined by the federal government and before migration occurs; when migration decisions are taken before policy decisions; in the absence of a central government if regional governments can make voluntary interregional transfers; when decisions over pollution control policies are followed by voluntary contributions by regions to a national public good; when regions can commit to matching the abatement efforts of each other; and when regions can commit to specific levels of abatement contingent on the emissions of other regions not exceeding some maximum level.