MECHANISMS OF ENIRONMENTAL INCENTIE REGULATION: HY ECOLOGICAL POLICIES IN TRANSITION AND DEELOPING COUNTRIES ARE NOT EFFECTIE? Autor laimir D Mateenko National Reearc Unierity Higer Scool of Economic Ruia mateenko@eru Alexei Korole National Reearc Unierity Higer Scool of Economic Ruia anitci@mailru Abtract An important part of te global enironment tabilization problem relate to enuring an effectie ecological regulation in tranition an eeloping economie Uually reearcer try to explain moet reult of economic policy in Ruia an oter tranition economie in particular of enironmental incentie regulation by preence of an inerite beaior an intitution an alo by conflict between new formal an ol informal intitution Te paper emontrate anoter poibility: tranition an eeloping economie may poe purely economic feature wic generate eriou itinction in reult of work of intitutional mecanim wic ae own rater goo reult in eelope countrie were tey were tranplante from A contract-teoretic moel i built a a game between a politician a regulator wo may be interete or iinterete in rent of firm an two type of firm one of tem i more interete in increaing pollution leel - ti type i referre a a "irty" firm anoter a a "green" firm Laffont 000 a inetigate a moel in wic firm-monopolit ae te following cot function: CTTK- were K - i a contant common for all firm T - i a cot parameter wic i a priate information for a firm type of firm - i a pollution leel permitte for a firm of tat type etermine by te regulator or coen by te firm from a menu of contract offere by te regulator If tere are two type of firm ten in Laffon cae a firm wit a lower T "green" one i alway efficient an receie an information rent Moreoer Laffont coniere tree type of regulator te ocial maximizer te interete majority an te iinterete majority an came to concluion tat te interete majority i te mot effectie ecological regulator Howeer te reult cange if te moel i enlarge to allow conition typical for tranition an eeloping economie Mateenko 00 introuce a more general cot function: CTkT - T were kt>0 It i proe tat wit te generalize cot function an information rent i receie by a relatiely effectie firm An inex of te relatie economic effectiene I i efine in a natural way For mall alue of I a "irty" firm proe to be a relatiely effectie firm wile for large alue of I a green firm oe For intermeiate alue of I no type of firm i able to capture a rent Te concept of mall an large inex I are mae precie in epenence on wic type of regulator i in power an form te menu of contract Tree type of regulator are uner conieration tey iffer by objectie function: following Laffont tee type are referre a te ocial maximizer interete majority or iinterete majority but not necearily tee term ae a literal political ene
It i proe in Mateenko 00 tat uner ome conition te interete majority in power ougt to ole wat mecanim to ue: eparating a menu of contract or pooling a uniting contract for bot type of firm In te preent paper anoter ituation i coniere: te ociety cooe a kin of mecanim wile te ruling majority make a eciion uner ti mecanim Te eciion are compare from te point of iew of ocial welfare e ow tat uner conition wic eem to be typical for eeloping an tranitional economie wen firm-polluter of "irty" type can gain from extening teir poibilitie to pollute an uc firm are uual in te economy te pooling tat i non-market mecanim i preferable for te ociety It appear tat if uner imilar conition te coice of mecanim i execute not by te ociety but by te interete majority te eparating i e in te more egree market mecanim woul be picke out For te cae typical for eelope countrie wen green firm are more effectie te eparating market mecanim i preferable for ociety an te interete majority pick out ti mecanim a well Te moel ow tat een te tanar regulation intitution wic proe to be fine in eelope countrie may generate abolutely ifferent unexpecte reult in toe economie in wic te firm proucing relatiely ig irect or inirect ecological amage poe tank to tat large relatiely economical effectiene an occupy an eential part of economy Ti cae i typical for eeloping an tranitional economie Key or: Ecological regulation pollution leel menu of contract equilibrium pooling mecanim eparating mecanim
Paper Introuction A part of te global problem of tabilization of enironment i connecte wit enuring of effectie ecological regulation in tranition an eeloping economie were a conierable part of te worl inutrial prouction i concentrate In 004 te are of een main "emerging" economie E7: Cina Inia Brazil Ruia Mexico Inoneia Turkey in global carbonic ioxie emiion wa 3 % an accoring to forecat it will increae up to 46 % by 05 year an up to 49 % by 050 [] Accoring to [] te main commoitie exporter in te worl woe prouction i relate wit te atmopere pollution in te preent time are Cina Ruia Mile Eat countrie Sout Africa countrie Ukraine Inia Malaie Tailan Taiwan enezuela Reearcer uually explain moet reult of economic policy in Ruia an oter tranitional economie an in particular of ecological policy by "inerite" manner of beaior an intitution a well a by conflict between new formal an ol non-formal intitution Howeer tere i anoter poibility: "new" economie poe purely economic peculiaritie tat lea to eriou ifference in work of toe intitutional mecanim wic owe temele quite goo in eelope countrie If in inutrial countrie te ame firm tat inflict te leat amage to enironment are in te ame time te mot effectie in te ene of profitability ten in many eeloping an tranition economie on te contrary many firm can obtain a large economic gain by inflicting a irect or inirect pollution Laffont [3] inetigate a moel of ecological regulation tat rater exactly correpon to economic ituation in inutrial countrie In ti moel firm-monopolit are coniere wic poe cot function a follow: C K were K > 0 i ome common for all te firm contant > 0 i a caracteritic of cot tat i a priate information of a firm te type of firm > 0 i a leel of pollution allowe for firm of tat type coen by te firm from a menu of contract propoe by te regulator or efinitely etablie by te regulator It follow from te formula tat if tere are two type of firm < uner a poibility to increae te leel of pollution te firm of type wic may be interprete a a "green" one gain a maller cot ecreae tan te firm of type a "irty" one
Te regulating boy poeing an information about cot of te type an about teir are frequency in te economy but poeing no information about a type of a concrete firm aign eiter a pooling contract or a menu of contract M { t t } were t t are te ize of tranfer are allowe pollution leel from wic a firm cooe an optimal for itelf contract In te Laffont moel te firm of type i alway economic efficient an receie an information rent; te origin of te latter i relate to a poibility for te firm to "preten" to belong to oter type Tree type of regulator were coniere tey iffer by objectie function: a ocial maximizer an interete majority an an iinterete majority; te interete majority i foun to be te mot effectie regulator from te point of iew of ecreaing te pollution leel Mateenko [4] a propoe a more general moel wit a cot function: C were > 0 If tere are two type of firm < ten it appear to be natural to conier a an inex of relatie economic efficiency te alue K were Te relatie efficiency of a "irty" firm may increae bot by increaing of ifferential by ecreaing te alue wic may be interprete a inetment in quality of prouct eg te cot of R&D an moernization Negatie alue of K are permitte For "mall" alue of K te firm of type irty proe to be a a rent receier wile for "ig" alue of K te type "green" firm oe For "intermeiate" alue of K no type of firm can capture a rent Te notion of "mall" an "ig" K are mae precie in epenence on wic type regulator i in power an form te menu of contract In a cae typical for eeloping an tranitional economie wen te are frequency of firm able to receie an aantage from pollution i relatiely large an tee firm are relatiely effectie K i "mall" te interete ie being in power allow an extremely ig pollution leel for firm of type ; moreoer not a eparating mecanim wit a free coice from a menu of
contract i ue but a pooling mecanim ie an aignment of a unique common contract Tat implie outie te frame of te moel a more ig egree of te tate interention into economy an more narrow relation between te regulator an te firm wic may lea to a iger egree of corruption All ti take place uner te ame "tanar" intitution wic are relatiely ucceful in oling te ecological regulation problem in eelope countrie were economic conition are ifferent K i "ig" In te preent paper te tuy of te moel [4] i continue an te main attention i pai to te quetion: wat type of te mecanim pooling or eparating will be coen uner ifferent political an economical conition? Te reearc i one uner an aumption of mall Two ituation are uner conieration: a type of mecanim i efine by te ociety wilt te eciion in frame of ti mecanim i mae by a regulator interete or iinterete ie; b bot type of te mecanim an te eciion about pollution leel are efine by a regulator e ow tat uner conition wic eem to be typical for eeloping an tranition economie "irty" firm are relatiely effectie an teir are in te economy i relatiely ig one migt in more egree expect a pooling ie non-market mecanim aignment In ection a ecription of te moel i gien In ection 3 te equilibrium pollution leel in ifferent cae are foun In ection 4 a comparion of te eparating an te pooling mecanim i one Section 5 conclue Te baic moel Let a fulfillment of a project aing ocial alue S be realize by a firm wic carrie pure cot were > 0 an i a pollution leel allowe to te firm i a caracteritic of cot wic i a priate information of te firm te type of te firm an take two alue: wit a probability и wit probability - an < Denote troug t a pure tranfer receie by te firm For t > 0 it i actually a tranfer wile for t < 0 te magnitue t repreent a tax pai by te firm Te rent receie by te firm i
U t C e amit a poibility of C < 0 ie of receiing a pure profit by te firm it may be uppoe in ake of implicity tat te pure profit arie at te expene of an export actiity ie it oe not lie own on te ouler of te conumer Te firm will execute te project if U 0 In contract teory ti conition i known a iniiual rationality IR A ocial ealuation of a pollution arm i were > 0 > 0 Te welfare of te conumer i equal to S t In [3] te parameter i interprete a ocial cot per unit of tranfer e amitting alo a poibility of a tax tract a a rate of return wic caracterize te aantage of uing in anoter project te mean wic te ociety loe in form of tranfer or gain in form of tax from firm e aume tat > 0 i contant; an aumption tat i a ranom alue oen't cange te caracter of reult Te ocial welfare conit of te conumer' welfare an te rent: S t U S U Uner a perfect information te ocial welfare maximization reult in zero rent an for firm of type an te pollution leel are aigne uc tat Uner an imperfect information wen te type of firm i unknown to te regulator if te eparating regulation mecanim i ue te regulator propoe to a firm a menu of contract M { t t } atifying i te conition of incentie compatibility IC te ene of wic i tat no firm can receie a gain by "pretening" to be a firm of anoter type: t C t C 3
t C t C 4 an ii conition of IR wic ae been alreay mentione: t C 0 5 t C 0 6 Beie te menu of contract M maximize te regulator' objectie function in wic tranfer enter wit a minu ign ie te regulator i interete in cutting own tranfer In [4] it i proen tat te optimal menu of contract atifying te conition IC an IR poee te following propertie: inequality a neceary an ufficient conition of receiing a rent by a firm of type i te K > te cae of "large" K ; a neceary an ufficient conition of receiing a rent by a firm of type i te inequality K < te cae of "mall" K ; 3 if K te cae of "intermeiate K ten no type of firm may obtain rent I In te cae of "large" K a firm of type receie no rent an te rent receie by te firm of type i equal to U t C K In te cae of "mall" K a firm of type receie no rent an a firm of type receie te rent U t C K Tu te rent epen on te pollution leel of anoter receiing no rent type of firm but te epenence uner a "large" K i negatie wile uner a "mall" K it i poitie Ti fact eentially efine te ifference in pollution leel wic te interete ie being in power et uner ifferent economic conition Let u aume tat te interete ie are in power wit probability p an te iinterete ie are in power wit probability q an tat eac of te ie being in power receie a are > / of te conumer welfare An analogou aumption in [3] i motiate by uppoing
tat uner conition of emocracy a majority of population come to power an te majority i alway Referring te type of te regulator we ue in te paper term iinterete majority or majority- wen we peak about te iinterete ie in power an interete majority or majority- wen we peak about te interete ie in power For u tee are only te term to itingui regulator' type 3 Deciion of te regulator In ti ection we inicate equilibrium pollution leel being inclue into te menu of contract in cae wen te regulator ue a eparating mecanim or being et if te regulator ue a pooling mecanim Te knowlege of tee pollution leel will be neee in Section 4 for a comparion of eparating an unifying mecanim 3 Separating mecanim 3 Diinterete majority make eciion Let te firm of type receie a rent te cae of "mall" K Te objectie function of te majority- take te form E[ S t] [ S S ] 7 Maximizing ti function te majority- inclue to te menu of contract te pollution leel an te leel atifying te equation 8 Ti menu of contract i feaible only uner K < Te latter inequality i te conition pecifying in tat cae te notion of "mall" K Let firm of type receie a rent te cae of "large" K Analogouly te majority- inert into te menu pollution leel и were
9 For feaibilty of te menu of contract te inequality K > a to be fulfille ti i an ientifier of te "large" K In cae wen no type of firm receie a rent te cae of "intermeiate" K uner K te menu of contract wit pollution leel i optimal Uner < K te menu of contract inclue pollution leel K Uner K < te pollution leel K are ue 3 Interete majority make eciion If te firm of type receie a rent te cae of "mall" K ten te objectie function of te majority- a te form: [ S S / ] 0 Maximization reult in te pollution leel an te leel atifying te following equation Ti menu of contract i feaible only if K < One more feaibility conition i te retriction on te moel parameter: > ti inequality i equialent to < If te firm of type receie te rent te cae of "large" K ten analogouly te majority- cooe te pollution leel an te pollution leel uc tat
For feaibility te inequality K > i require Beie te following conition on te parameter a to be fulfille: > ti i equialent to < ten for If no type of firm receie rent te cae of "intermeiate" K an > < K K te menu of contract wit pollution leel i optimal; uner te menu of contract inclue pollution leel K ; an uner K < te pollution leel K will be ue If te alue i negatie but i not too large by it abolute alue o tat < < < ten uner K te regulator inclue into te menu of contract pollution leel an 3 Pooling mecanim Uner efinite conition ee Section 4 it i aantageou for regulator to ue a pooling mecanim intea of a eparating menu of contract Ti may ere an explanation of comparatiely low preaing of market regulation mecanim in eeloping an tranition economie in comparion wit eelope countrie Uner a pooling regulation mecanim te regulator propoe only one common for all firm contract t Conition IC now ae no ene but tere ougt to ol te conition IR an tu
t max{ C C } Te rent U t C will be receie by tat type of firm for wic cot are le Uner K < te firm of type receie a rent an uner K > te firm of type oe an beie in bot cae te rent i equal to K Te rent i abent in a ingle cae wen K 3 Diinterete majority make eciion In cae of "mall" K wen te rent i receie by te firm of type te majority- maximize te function [ S E ] 3 an olution i A "mallne" of K mean K < te function In cae of "large" K wen te firm of type receie a rent te majority-maximize [ S E ] an olution i "Large" K mean K > 3 Interete majority make eciion te function In cae of "mall" K wen te firm of type receie a rent te majority- maximize [ S E ] 4 an et uc pollution leel tat [ ] ] 5
In cae of "large" K wen te firm of type receie a rent te majority- maximize te function [ S E ] an et te pollution leel uc tat [ ] ] Large" K mean > K In te cae of "mall" K te leat pollution leel i et by te majority- an te greatet by te majority- Ti comparion i correct uner K < In ti cae te pollution leel are uc tat < In contrary in te cae of "large" K te leat pollution leel i et by te majority- an te greatet by te majority- Ti comparion i correct uner K > In ti cae pollution leel are uc tat < A far a te eriatie ' mut be poitie we mut put ome aitional retriction on moel parameter: > > > wat a i reaily een equialent to te following conition:
> > 33 Deciion of majority- in te cae typical for eeloping an tranition economie For u te mot intereting i te cae < < 6 wic eem to be typical for eeloping an tranition countrie were te are of firm of type in te economy i large Note tat te left an ie of te inequality 6 mean te amiibility of te eparating mecanim uner K > ee Subection 3 Te rigt an ie of 6 mean a iolation of conition of feaibility of te pooling mecanim uner K > Poible pollution leel are linke by te relation: < < < < Hence in a rater narrow interal < < te feaibility conition allow te majority- to K employ bot te pooling an te eparating mecanim Ti cae i epecially intereting becaue te eparating mecanim i employe troug "large" K wile te pooling mecanim i employe troug "mall" K In oter wor te ame alue K appear to be "large" for te eparating mecanim an "mall" for te pooling mecanim Te mecanim for wic te objectie function i greater will be coen; ti epen in particularly on te kin of function Conier te cae of quaratic function e are interete weter te type of te mecanim coen by te majority- correpon to te ociety' interet Teorem Let be mall enoug If K i cloe to an < ten te majority- will K cooe te eparating mecanim an inclue into te menu of contract te pollution leel an Ti coice correpon to te interet of te wole ociety If K i cloe to an
K > ten te majority- will cooe te pooling mecanim an et te pollution leel Ti coice oen't correpon to te interet of te ociety a te wole Beie te pollution leel are boun by te inequalitie: < < Proof Te objectie function of te majority- uner te eparating mecanim in te cae of "large" K a te form: [ S ep ] S an uner te pooling mecanim in te cae of "mall" K it a te form: [ S pool ] S e will conier te limit beaior of te objectie function uner 0 Strict inequalitie for te limit alue will be el for ufficiently mall alue of e obtain: ] [ lim 0 S L ep ep were lim 0 ; ] [ lim 0 pool pool S L were lim 0 Conier two extreme cae
pool L Ten Firt cae Let < but i ufficiently cloe to for one may neglect te lat term in K L ep L pool 4 > 0 If i mall an K i cloe to an < ten te majority- cooe a eparating K mecanim an beie te ociety' welfare function i equal to ep K ep By uing te pooling mecanim of "mall" K pool pool K ep pool Tu > ie ociety' interet coincie wit te coice of te interete ie Secon cae Let K < but K be ufficiently cloe to for te ifference of te lat term in pool L from migt be neglecte Ten K an terefore L ep L pool 4 [ 4 ] 4 [ ] < 0
Te majority- cooe te pooling mecanim in te Secon cae uner mall Compare te ocial welfare function: ep pool 4 [ ] > 0 Te eparating mecanim i preferable for te ociety Pollution leel are linke by te following relation: < < QED 4 Comparion of eparating an pooling mecanim uner mall Now we will inetigate te ituation were: i mall; te coice of te kin of te mecanim eparating or pooling i mae eiter by te ociety or by te regulator te majority- or te majority-; 3 in accorance to a kin of te mecanim te regulator et a menu of contract or a uniform contract One can tract te alue a a reult of eiation from te point ˆ by ecreaing te alue or by increaing te alue Notice tat in te point ˆ te following equality ol: e will uppoe in ti Section tat te function i ifferentiable ten an approximate equality i ali: Furter an analyi of te type of te mecanim i conucte on te bae of a comparion of te alue of te objectie function an of teir eriatie by ue of te enelope teorem eg [5]
It i eaily een tat in te point ˆ te ocial welfare for te eparating an te pooling mecanim coincie a well a it firt eriatie tey are gien below 4 Cae of "mall" K te firm of type receie a rent Lemma Let te cae of "mall" K take place; te ociety cooe te mecanim an te regulator efine only te menu of contract an B p q Ten: uner B > 0 te eparating mecanim i preferable for te ociety; uner B > 0 te pooling mecanim i preferable for te ociety Proof e will tink about a a reult of ecreaing an compare mecanim by econ eriatie of te ocial welfare function in te ariable in te point ˆ Tee eriatie are calculate in te following part I an II of te proof an ten in part III te comparion of te eparating an te pooling mecanim i mae I Te eparating mecanim Ii Majority- i in power Te ocial welfare equal were i te objectie function of te majority- ecribe by 7; te pollution leel are foun in point 3 Applying to te enelope teorem we fin It follow from 8 tat
[ ] 3 e fin te econ eriatie of te ocial welfare function in te point ˆ : ˆ ˆ Iii Majority- i in power Te ocial welfare i were i te objectie function of te majority- ecribe by 0 are te pollution leel efine by te majority- tey are foun in 3 Applying te enelope teorem to we fin It follow from tat [ ] 3 In reult in te point ˆ :
ˆ ˆ II Te pooling mecanim IIi Majority- i in power Te ocial welfare equal were i te objectie function of te majority- ecribe by 3 Te pollution leel a i own in ubection 3 equal Analogouly to te cae of te eparating mecanim in te point ˆ ˆ ˆ IIii Majority- i in power Te ocial welfare equal were i te objectie function of te majority- ecribe by equality 4 Pollution leel i efine by equation 5 Similarly to te cae of eparating mecanim in te point ˆ ˆ ˆ III Comparion of te eparating an te pooling mecanim in te point ˆ Te expecte alue of te econ eriatie of te ocial welfare uner te eparating mecanim i
D ep B ˆ an uner te pooling mecanim i D pool B ˆ Preferable from te point of iew of te ocial welfare i te mecanim wit a greater alue of te econ eriatie in ˆ Let u tre tat te ign of oen't matter Actually in ti cae it i negatie ˆ o B B If B > 0 ten < an te eparating mecanim i preferable If B < 0 ten te ˆ ˆ pooling mecanim i preferable QED For u te mot intereting cae i te typical for te mot of eeloping an tranition economie one wen wit a large probability te majority- i in power an "te are" of firm of type in te economy i great ie q i great an conition 6 ol Teorem Let te cae of "mall" K be coniere an let be mall Uner typical for eeloping an tranition economie conition wen conition 6 ol an q i ufficiency large if te coice of type of mecanim i mae by te ociety ten te pooling mecanim will be coen If te majority- i in power an cooe bot a mecanim an a menu of contract ten te pooling mecanim will be coen Proof In cae uner conieration a ign of te magnitue B i efine by te econ term wic i negatie By Lemma te unifying mecanim i preferable for te ociety Uner conition 6 te conition of feaibility of te eparating mecanim i iolate terefore te majority- will cooe te pooling mecanim QED
Teorem 3 Let te cae of "mall" K be coniere an let be mall Uner conition wen te "are" of te firm of type in te economy i large te conition 6 ol an te majority- i in power ti regulator cooe te eparating mecanim ti coincie wit te ociety' interet only if > 0 In te oppoite cae te unifying mecanim i preferable for te ociety Te pollution leel are linke by te relation: < < Proof In cae of te eparating mecanim te objectie function of te majority- i efine by Equation 7 an te pollution leel by Equation 8 In cae of te pooling mecanim te objectie function i efine by Equation 3 an te pollution leel i point ˆ te alue of tee function coincie te pollution leel coincie an equal firt eriatie coincie an equal to In ; te Te econ eriatie in tee two cae are equal correponingly: D ep ˆ Tu te majority- cooe te eparating mecanim If > ten a i een from Lemma te ociety in wole woul cooe te eparating mecanim an if < ten te pooling mecanim i coen QED 4 Te cae of "large" K a rent i obtaine by te firm of type A a been ai te cae of "large" K eem to be typical for eelope countrie Lemma Suppoe tat te ociety efine te type of te mecanim an te regulator cooe te menu of contract Te cae of "large" K i uner conieration Let te majority- be in power wit a large probability more exactly p i o mall tat te ign of te magnitue
C p q i efine by te econ term an te "te are" of firm of type i ufficiently large inequality > ol Ten C > 0 an te eparating mecanim i preferable for te ociety If uner te ame conition < ten te pooling mecanim i preferable for te ociety Proof For "large" K it i conenient a it wa one in [3] to tract te alue a a reult of increaing te magnitue In part I an II of te proof we will obtain an expreion for te eriatie of te ocial welfare function wit repect to in te point ˆ an ten in part III of te proof we will execute a irect comparion of te eparating an te pooling mecanim I Separating mecanim Ii Majority- i in power Te ocial welfare equal K were te objectie function of te majority- a te form: [ S U ] E Te pollution leel an are efine correponingly by equation 9 an Applying te enelope teorem to we fin: [ ] From 9 we fin:
[ ] 3 Applying te enelope teorem once more we obtain: Tu for te ocial welfare function we ae: [ ] 3 Iii Majority- i in power Te ocial welfare equal K were te objectie function of te majority- a te form
U S E [ S ] S Te pollution leel и are efine correponingly by relation an Applying te enelope teorem to we fin: It follow: [ ] [ ] 3 Applying te enelope teorem once more we obtain: Tu we ae for te ocial welfare function:
[ ] 3 II Te unifying mecanim IIi Majority- i in power Te ocial welfare equal were te objectie function of te majority- a te form: S [ ] Te pollution leel i efine by te equation: 7 Hence Applying to te enelope teorem we fin: ] [ From 7 we obtain:
[ ] 3 Applying te enelope teorem once more we obtain: Tu for te ocial welfare function: [ ] 3 IIii Majority- i in power Social welfare equal ere te objectie function of te majority- i: [ S ] Te pollution leel i foun from te equation:
8 Applying to te enelope teorem we fin: From 8 we obtain: [ ] [ ] 3 Applying te enelope teorem once more we obtain: Tu for te ocial welfare function we ae:
[ ] 3 III Comparion of te eparating an te pooling mecanim in point ˆ In te point ˆ te alue of te ocial welfare function uner eparating an pooling mecanim coincie te pollution leel an coincie an equal te firt eriatie alo coincie Te expecte alue of te econ eriatie of te ocial welfare uner te eparating mecanim i equal to: С D ep an uner te unifying mecanim: q p D pool C It i clear tat 0 > > o te ign of C uner mall p i efine by te ign of If > ten 0 > C an te eparating mecanim i preferable for te ociety If < ten 0 < C an te unifying mecanim i preferable for te ociety QED Teorem 4 In cae of "large" K if te majority- i in power an cooe bot te mecanim an te menu of contract an te conition > conition of feaibility of te
eparating mecanim ol ten te majority- cooe teeparating mecanim Beie te pollution leel are linke by te following relation: < < If < ten only te pooling mecanim i aailable Proof In te point ˆ te alue of te objectie function of te majority- for te eparating an te pooling mecanim coincie te pollution leel an firt eriatie alo coincie Te econ eriatie in tee two cae are equal correponingly to: coincie an equal te D ep * G an D pool G were G * Tu inepenently on relation between alue eparating mecanim QED и te majority- will cooe te Teorem 5 In te cae of "large" K if te majority- i in power an cooe bot te mecanim an te menu of contract ten it will cooe te eparating mecanim
Proof In te point ˆ te alue of te objectie function of te majority- for te eparating an te pooling mecanim coincie te pollution leel an coincie an equal firt eriatie coincie Te econ eriatie in tee two cae are equal: te D ep D pool Tu te majority- will cooe te eparating mecanim QED 43 Dicuion of reult Te main reult of te reearc are collecte in Table an Table Coice of te kin of te mecanim an te pollution leel uner mall K an mall uc tat < o et mecanim o et a menu of Amiible pollution at mecanim i contract leel coen Society Majority- Pooling Majority- Majority- Majority- Majority- Majority- an Separating Table correpon te cae wic eem to be typical for many eeloping an tranition economie: "irty" firm are relatiely effectie an teir are in te economy large Moreoer feaible pollution leel are linke by te relation: i relatiely < < <
Table correpon te cae typical for eelope country were "green" firm are relatiely efficient In ti cae te following relation between amiible pollution leel ol: if > ten < < < ; if < < ten < < < < ; if < < ten < < < < Notice tat in all cae coniere in Table te are of "green" firm may be eiter iger or wittingly iger tan in te cae coniere in Table Te ituation repreente in Table an Table in our opinion quite correpon to economic conition in eeloping an tranition economie an in eelope countrie correponingly Table Coice of te kin of te mecanim an te pollution leel uner large K o et mecanim o et a menu of Amiible pollution at mecanim i contract leel coen Society Society if > Pooling an Separating if < Society or Majority- Majority- if > Pooling an Separating if < Majority- Majority- an Separating
Comparing te rigt part of te table we ee tat te employment of te eparating market mecanim may be expecte in a more egree in eelope countrie tan in eeloping an tranition economie leel In te cae typical for eeloping an tranition economie Table te greater pollution of "green" firm i reace uner te pooling mecanim wen te interete majority et te menu of contract On te contrary in te cae typical for eelope countrie Table te majority- appear to be te mot effectie ecological regulator Table oweer allow to make anoter concluion: wen te are of "green" firm in te economy increae one may expect in eelope countrie a iger egree of pooling mecanim employment 5 Concluion In ti paper on bae of te contract teory te work of an ecological policy mecanim i tuie uner ifferent conition incluing bot economic component economic efficiency of ifferent type of firm an teir "are" frequencie in te economy an a political component wo namely -- te ociety or te regulator -- make eciion concerning te type of te mecanim -- pooling or eparating wo i in power an make eciion about amiible pollution leel Analyi ow tat uner te ame frame mecanim it ariety an te reulting economical policy epen conierably on tee conition Tu te reearc put uner oubt a broaly preaing iew about a poibility of an aequate tranfer into an arbitrary taken tranition or eeloping economy of te intitution wic ae proe temele perfect in one or anoter eelope country Reference
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