Hostname: page-component-78c5997874-94fs2 Total loading time: 0 Render date: 2024-11-07T12:34:31.472Z Has data issue: false hasContentIssue false

Environmental regulation and the optimal location of the risk-averse firm under uncertainty

Published online by Cambridge University Press:  18 July 2005

MURAT ISIK
Affiliation:
Department of Agricultural Economics and Rural Sociology, University of Idaho, 28B Ag Science Building, Moscow, ID 83844, USA. Tel: 208-885-7214. Fax: 208-885-5759. E-mail: [email protected]

Abstract

The interrelationships between environmental regulations and firm location are essential features of economic development. This paper examines the optimal location of a competitive firm in response to environmental costs imposed by the abatement investment and taxes when the cost of the environmental regulation varies spatially under uncertainty. It contributes to the literature by incorporating the spatial setting into a risk-averse firm's location decision in the presence of environmental regulation uncertainty. An augmented cost of the abatement, input tax, or emission tax causes the risk-averse firm to locate closer to the output market. Uncertainty about environmental regulations also leads a risk-averse firm to locate closer to the output market. Policy implications of the results are discussed. The results have implications for the design and implementation of environmental and other development-related policies, environment–development debate, and trade–environment debate.

Type
Research Article
Copyright
© 2005 Cambridge University Press

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)