Academic Commons

Reports

Politics, Public Bads, and Private Information

Sheriff, Glenn D.

Preferential treatment for politically influential sectors often has undesirable consequences such as increasing pollution or ecosystem degradation. Private information on firm productivity constrains the government's ability both to redistribute income and regulate public bad production. Given political economy and information constraints, this article characterizes a social-welfare maximizing policy. The optimal policy uses a single instrument to achieve both goals, making income-support subsidies contingent upon reduction of bad outputs. Output price uncertainty works to the advantage of the government, potentially eliminating some firms' information advantage.

Files

More About This Work

Academic Units
Institute for Social and Economic Research and Policy
Publisher
Institute for Social and Economic Research and Policy, Columbia University
Series
ISERP Working Papers, 05-04
Published Here
August 18, 2010

Notes

April 2005.

Academic Commons provides global access to research and scholarship produced at Columbia University, Barnard College, Teachers College, Union Theological Seminary and Jewish Theological Seminary. Academic Commons is managed by the Columbia University Libraries.