Cross-sectoral pollution externalities and multiple equilibria. (21st June 2019)

• Record Type: Journal Article
• Authors: Karp, Larry; Paul, Thierry
• Editors: Agliardi, Elettra; Casari, Marco; Xepapadeas, Anastasios
• Is Part Of: Environment and development economics. Volume 24:Number 6(2019)
• Page Start: 624
• Page End: 642
• Publication Date: 2019-06-21
• Subjects: coordination games, -- costs of adjustment, -- cross-sectoral pollution, -- factor reallocation, -- learning-by-doing, -- intersectoral migration, -- multiple equilibria; C61, -- J21, -- O13, -- R23; Economic development -- Environmental aspects; 330.9
• DOI: 10.1017/S1355770X19000147
• Languages: English
• ISSNs: 1355-770X

Abstract

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.