Environmental Economics

Lecture 3

Fanny Henriet

October 4, 2019
Last week: total demand for a public good

MC

DNV
D2V
D1

Q1 Q2V QNV Q
Last week: Can we set a price for public goods and
obtain efficiency?

If there is a tax τj per unit of G, such that agent j chooses G ∗ ?

Let’s look for τj .
We want the solution of his optimisation:

max uj (G, xj − τj G)
G

to be a Pareto efficient level of public good G ∗

Last week: Can we set a price for public goods and
obtain efficiency?

He chooses G such that

∂uj
∂G (G, xj − τj G)
∂uj
= τj
∂x (G, xj − τj G)
The price τj such that Mr j chooses G ∗ must be such that:
∂uj ∗
∂G (G , xj − τj G ∗ )
∂uj
= τj
∗ − τj G ∗ )
∂x (G , xj
It is straightforward that τj 6= τk in general. Except if agents are
identical...
Allocation of local public goods

With local public good, is it more likely that agents are identical?
First, what are local public goods?
I A local public good is one that benefits only consumers in
the local community rather than benefiting the total
population of consumers
I Dimension of location: individuals consume (basically) all
goods, both public and private, at the same location
I Bundling of the consumption of housing (residence) and the
consumption of local public goods (schools, police, air
quality, parks)
Loacl versus Global public goods
Local Global
Location matters. Only con- The location of the source of the
sumers located near the source externality does not matter. All
of the public goods are affected consumers living in a country
by them. or on Earth are affected by the
global public goods
Ex: clean air and water; Ex: stable climate; peaceful coun-
schools; recreational parks; lo- try
cal police; hospitals; courts
Cities and governments can Because many governments are
find a policy that lead to the required to act and because of
optimal level of local pollution the strong free riding incentive,
it is extremely difficult to solve
global pollution issues
Consider the case of a city resident about to move to
the suburbs

I What variables will influence his choice of a municipality?

I If he has children, a high level of expenditures on schools
I If he is retired, the presence of a municipal golf course
I Availability and quality of such facilities and services as
beaches, parks, police protection, roads, and parking
facilities
I He wants to pick the community which best satisfies his
preference pattern for public goods
Heterogeneous bundles of public goods and taxes

High taxes –
Good
hospitals, golf

High taxes – Low taxes –

Good schools, decent
hospitals, golf schools, no
Low taxes – hospital,
Bad schools, beach
Few services

High taxes –
Good schools,
golf, beach
Can the allocation of local public goods be optimal?

I Samuelson has asserted that no ‘market type solution’ exists

in economies with public goods Because there is no
mechanism that forces people to reveal their true
preferences for public goods
I TIEBOUT (1956) If public goods are local, then a market
type solution may exist, at least approximately
I As people ‘voted with their feet’ to choose their preferred
community, they would reveal their demand for public goods
Municipalities are clubs as they provide a combination of
services and taxes
(The next slides are adapted from Emmanuel Saez’ slides from
Berkeley)
The Tiebout model

I What is it about the private market that guarantees optimal

provision of private goods that is missing in the case of
public goods?
I Tiebout’s insight was that the factors missing from the
market for public goods was competition
I The situation is different when public goods are provided at
the local level by cities and towns:
I Competition will naturally arise because individuals can vote
with their feet: if they don’t like the level or quality of public
goods provision in one town, they can move to the next town
I This threat of exit can induce efficiency in local public
goods production
The Tiebout formal model

We consider a very simple model to illustrate Tiebout’s insight

and theorem
Suppose there are 2 · N families with identical income Y and 2
towns with N homes each
Towns 1 and 2 supply level G1 , G2 of local public schools
There are 2 types of families:
1) N families with kids, with utility U K (C , G), value private
consumption C and schools G
2) N elderly families, with utility U E (C ), value only private
consumption C
The Tiebout equilibrium definition

Allocation of families across towns is a Tiebout Equilibrium if

and only if:
1. In each town, G is decided by median voter and financed
equally by town residents with budget Y = G/N + C
⇒ If majority in town is elderly then G = 0 as this
maximizes U E (Y − G/N )
⇒ If majority in town is families with kids then G = G ∗
that maximizes U K (Y − G/N , G)
2. No 2 families want to exchange locations across towns
The Tiebout theorem

Tiebout Theorem Part I: In equilibrium, families will sort

themselves in towns according to their taste for public good (1
town with elderly only, 1 town with families with kids only)
Proof: Suppose elderly dominate in town 1 and G1 = 0, then
families with kids dominate in town 2 and G2 = G ∗ . If there is a
family with kids in town 1, then there is an elderly family in
town 2 and they are willing to switch ⇒ not an equilibrium.
The Tiebout theorem

Tiebout Theorem Part II: In each town, the level of local

public good is efficient
Proof: In elderly town, G = 0 which is efficient as nobody
values G.
In kids town, G ∗ maximizes U K (Y − G/N , G) so that
−UCK /N + UGK = 0 ⇒ UGK /UCK = 1/N
⇒ UGK /UCK = MRSGC = N /N = 1 = MC which is the
P P

Samuelson rule
The Tiebout model

People can vote with their feet by choosing the locality that best
fits their tastes and provides the best public goods given the tax
The main message of the model is that competition across local
jurisdictions puts competitive pressure on the provision of local
public goods:
I Public goods need to reflect tastes of local residents
I Public goods need to be efficiently provided (without waste)
Centralized versus decentralized government

Conservatives/libertarian tend to like decentralized governments

over centralized governments
Conservatives/libertarian dislike redistribution and like
individual choice and competition. In Tiebout model:
I local governments do not do any redistribution: individuals
receive in local public goods exactly what they are paying in
taxes (= benefit principle of taxation)
I individuals can choose (through their location choice) their
preferred mix of public goods and taxes
I Local govts provide local public good preferred by local
residents
Another version of the Tiebout model: income
stratification

Utility function of agent i in locality j

v i = v(pc , g j , wi − p̄dj D j )

where pc is consumption price, p̄dj is after tax price of housing ,

g j quality of public good in j, wi income of i, residential land D j
per person in j (everyone in j pays the same tax).
Indifference curve of agent i in the (g j , p̄dj ) plane ?
Single crossing property

Indifference curves cross at most once:

∂v/∂g j
(pc , g j , wi − p̄dj )increases with wi
∂v/∂w
Budget constraint

Cost of providing g j

G j = G(N j , g j ) = cg j Nj

Tax revenues
T j = τ j pdj D j
Given residential land D j Budget constraint:

Nj
p̄dj − pdj = cg j
Dj
Decentralization

In general, decentralizing gov’t provisions of public goods

improves welfare as it lets individuals find (p̄dj , g j ) combinations
that better match their preferences.
Starting with both types of individuals in (C), they are both
made better off when (C) splits into a low g j low tax community
(A) and a high g j , high tax community (B).
Decentralization
Decentralization

I Things get more complicated if the tax base changes along

with the congestion of the public good.
I Suppose higher wealth indivuals consume more land. When
the split occurs, NA /DA > NB /DB (i.e. higher population
density in the poor community) This raises the cost of
providing any level of g
I Poor now face a worse option in (P). Poor would prefer to
stay in a community with the rich, vote against
decentralization.
I Rich vote for zoning requiring big plots to keep poor out
Problems with the Tiebout model

The Tiebout model is an idealized model that requires a number

of assumptions that may not hold perfectly in reality:
1. Individuals can move costlessly across towns (low mobility
costs)
2. Individuals have perfect information on the benefits and
taxes paid in each town
3. There must be enough towns so that individuals can sort
themselves into groups with similar preferences for public
goods
4. No externalities/spillovers of public goods across towns
[with spillovers across towns, public goods will be under
provided in Tiebout model, e.g. parks, police]
Problems with the Tiebout model

The Tiebout model requires equal financing of the public good

among all residents.
Lump-sum tax: A fixed taxation amount independent of a
person’s income, consumption of goods and services, or wealth.
Sometimes called a poll tax.
Towns typically finance their public goods instead through a
property tax where rich pay more than poor (because they live in
nicer houses). The problem that property taxation causes is that
the poor chase the rich (rich also want to be with rich)
Problems with the Tiebout model

Two mechanisms prevent poor from chasing the rich:

1) Housing prices: places with rich people have high housing
prices
2) Zoning: Restrictions that towns place on the use of real
estate (e.g., each house must sit on a parcel of at least 6000 sq
feet)
Zoning regulations protect the tax base of wealthy towns by
pricing lower-income people out of the housing market.
Evidence on the Tiebout Model

Tiebout Sorting: Resident Similarity Across Areas

A testable implication of the Tiebout model is that when people
have more choice of local community, the tastes for public goods
will be more similar among residents than when people do not
have many choices
This fact is indeed pretty well established
More Efficiency when there is more Tiebout sorting
This fact is controversial
Evidence on the Tiebout Model

Hoxby (2000) considers public school districts in the US. She

compares cities where:
A) There are few large school districts and hence little choice for
residents (such as Miami)
B) There are many small school districts and hence a lot of
choice for residents (such as Boston)
2 key findings:
I) Cities with few districts have less sorting across neighborhood
(in terms of school quality) than cities with many districts (this
result is well established)
II) Cities with many districts have higher test scores on average:
this result is controversial (see Rothstein, 2007 critique)
Environmental justice

I The efficient Tiebout allocation sorts people according to

their preferences for public goods
I In equilibrium, rich people can locate in beautiful places
with a nice environment, whereas poor people can locate in
polluted places
The next slides are adapted from the prsentation of Christopher
Timmins (Duke University) at Heartland Conference University
of Illinois at Urbana Champaign October, 2017, entitled “What is
Environmental Justice and Why Economists Should Care?”
Introduction:%%History(of(EJ(Movement
• In*1978,*31,000*gallons*of*
Polychlorinated*Biphenyl*
(PCB)*was*illegally*
dumped*on*behalf*of*the*
Ward*Transformer*
Company*of*Raleigh*
along*210*miles*of*roads*
in*14*counties*in*North*
Carolina.
http://www.golder.com/en/modules.php?name=Projects&sp_id=70&sector_id=298

• PCB*Exposure:*skin*conditions,*liver*damage,*lowered*immune*
system*response,*cognitive*failure*in*children.

2
History:%Ward(Transformer
• The*state*developed*a*plan*to*collect*PCB<contaminated*
soil*for*landfilling.
• Landfill*Requirements:
< bound*by*counties*where*spill*occurred
< surrounded*by*at*least*16*acres*of*land
< isolated*from*highly*populated*areas
 History:%Ward(Transformer

North%Carolina
Two*alternative*sites*
identified:

1. Publicly*owned*landfill*in*Chatham*County
2. Recently*foreclosed*private*property*in*
Warren*County
4
History:%Ward(Transformer

Chatham*Co.*Site:
< clay*lined
< publicly*owned
History:%Ward(Transformer
Chatham*County*(1980)

Chatham*Co.*Site:
< clay*lined
< publicly*owned

White Black Other

Warren*Co.*Site*(Shocco,*NC):
< private*land
< shallow*water*table*(5<10*ft.*below*surface)
< nearby*residents*relied*on*local*wells*for*water
7
History:%Ward(Transformer
Warren Shocco

White Black Other White Black Other

Warren*Co.*Site*(Shocco,*NC):
< private*land
< shallow*water*table*(5<10*ft.*below*surface)
< nearby*residents*relied*on*local*wells*for*water
8
Race%in%
Black, White and Other in
North*Carolina

North%Carolina%(1980)
North Carolina (1980)

White Black Other

Chatham Warren Shocco

White Black Other White Black Other White Black Other

9
Poverty%in% North*Carolina

North%Carolina%(1980)

Non<Poverty Poverty

Chatham Warren Shocco

Non<Poverty Poverty Non<Poverty Poverty Non<Poverty Poverty

10
History:%Warren(County,(NC
• Warren*Co.*site*
chosen.
• Residents*protested*
siting*of*PCB*landfill*in*
1982.
• Drew*widespread*
support*from*civil*
rights*groups*and*
gained*national*media*
https://www.citylab.com/equity/2015/11/how<the<collapse<of<soul<city<fired<up<the<environmental<
attention. justice<movement/415530/

• Protests*were*among*first*to*raise*awareness*about*
environmental*concerns*of*minorities.**Widely*acknowledged*
as*birth*of*environmental*justice*movement. 11
 Population*Percentage*Black
0.9

0.8

0.7

0.6

0.5

0.4

0.3

0.2

0.1

0
1970 1980 1990

Shocco Warren NC

12
What%is%Environmental%(In)Justice?

Minorities,*people*of*color,*and*low<income*households*
bear*a*disproportionate*amount*of*burden*or*risk*from*
environmental*pollution.
Environmental%Justice:%Definition
The*fair*treatment*and*meaningful*involvement of*all*
people*regardless*of*race,*color,*national*origin,*or*
income*with*respect*to*the*development,*
implementation,*and*enforcement*of*environmental*
laws,*regulations,*and*policies.*
Fair*treatment*means*that*no*population,*due*to*policy*
or*economic*disempowerment,*is*forced*to*bear*a*
disproportionate*share of*the*negative*human*health*or*
environmental*impacts*of*pollution*or*environmental*
consequences*resulting*from*industrial,*municipal,*and*
commercial*operations*or*the*execution*of*federal,*
state,*local,*and*tribal*programs*and*policies.
! U.S.%Environmental%Protection%Agency
14
In Europe
•  In France, according to Laurian (2008) « towns with high proporDons
of immigrants tend to host more hazardous sites, even controlling for
populaDon size, income, degree of industrializaDon of the town and
region. «
•  In the UK, Air polluDonhas been idenDfied as an issue
disproporDonately affecDng minority ethnic and racial groups,
parDcularly those who idenDfy as Black-BriDsh African.
Exposure
• Early*empirical*work*in*EJ*focused*on*documenting*
disproportionate*exposure.

• Are*EJ*claims*based*on*race'or class'?

• Evidence*has*generally*provided*strong*support*for*
disproportionate*exposure*to*many*nuisances.
Mechanisms
Most*debate*in*environmental*justice*field*is*over*
mechanisms behind*disproportionate*exposure:

< Racial*discrimination
< Residential*sorting
< Siting
< Institutions*(government,*judicial)

Mechanism*! Policy*Implications

33
Mechanisms:%Racial(Discrimination

Not*always*explicit*
or*current,*but*may*
have*long<lasting*
implications…

Aerial*view*of Levittown,*Pennsylvania circa*1959.*https://en.wikipedia.org/wiki/Levittown.

Mechanisms:%%Sorting
When*economists*talk*about*residential*sorting,*they*are*
usually*talking*about*Tiebout:

Tiebout,'C.'M.'(1956).''“A'Pure'Theory'of'Local'
Expenditures,”'Journal'of'Political'Economy.

People*move*based*on*their*preferences.**This*reveals*
preferences*for*local*public*goods*(i.e.,*“voting*with*feet”).
< “White*Flight”
< “Minority*Move<in”

35
A Tiebout model
•  Instead of assuming families with kids versus elderly people, we
assume rich versus poors
•  Preferences may also vary with income, but there is only one
dimension of heterogeneity
Formal%Model%of%Tiebout Sorting

Preferences:

• Household*gets*utility*from*
< environmental*quality*(g)
< consumption*of*all*other*goods*it*can*get*with*
leftover*income*after*paying*for*a*house*(y<p).

• Household*preferences*differ*by*income.
“Single%Crossing”%Property

As*income*increases*(yA
to yB),*indifference*
curves*become*steeper.*

Families*of curves*only*
cross*once.

37
Interpreta4on of the single crossing property
•  For a given level of public good (here clean environment), type B
agents are willing to give up more income (or equivalently to pay a
higher price) in order to have an extra unit of the public good.
•  High income agents (type B) also have different preferences, which
are perfectly correlated with income.
Take the following situa4on
Type y is indifferent between two towns (gA, PA) and (gB, PB) .

Draw the indifference curves of type yA passing through point (gA, PA) and (gB, PB)

Draw the indifference curve of type yB passing through point (gA, PA) and (gB, PB)

In which town are type yA , type yB and type y going to end up ?

Income straDficaDon across communiDes

Formal%Model%of%Tiebout Sorting
• Suppose:*
< the*two*locations*1*and*2*are*evenly*sized
< two*types*of*households*(A*&*B)
< minority*of*households*are*type*A*(poverty)
< majority*of*households*are*type*B*(non<poverty)
• In*order*for*the*land*market*to*clear,*majority*type*B*
households*must*be*content*to*live*in*both*
locations.
• In*order*for*this*to*be*true,*low*environmental*
quality*location*has*to*be*cheaper.

40
Tiebout sor4ng
•  The price gap between locaDons 1 and 2 offsets the difference in
environmental quality for type B households, making them
indifferent.
•  It is therefore the case that low income group will only live in the low
environmental quality locaDon
Environmental%Gentrification
“Hallmarks”*of*Environmental*Gentrification*(Banzhaf*
and*McCormick*2007):

Environmental*improvements*followed*by…

43
Environmental%Gentrification
(1) Rising*property*values*and*rental*
costs.
(2) New*construction*/*renovation;*
conversion*from*rental*to*owner<
occupied*property.
(3) Renovation*of*historic*buildings*and*
passage*of*historic*preservation*
ordinances.
(4) Population*turnover*towards*higher*
SES.

(5)**Endogenous*change*in*mix*of*public*goods*provided;*new*
“aesthetic”*(e.g.,*new*businesses,*etc.),*affects*endogenous*
amenities*(e.g.,*crime*rate,*school*quality).
44
Environmental%Gentrification
https://features.marketplace.org/yorkandfig/

(1) Rising*property*values*and*rental*
costs.
(2) New*construction*/*renovation;*
conversion*from*rental*to*owner<
occupied*property.
(3) Renovation*of*historic*buildings*and*
passage*of*historic*preservation*
ordinances.
(4) Population*turnover*towards*higher* https://www.shutterstock.com/image<vector/set<hipster<men<on<
SES. white<background<412167445

(5)**Endogenous*change*in*mix*of*public*goods*provided;*new*
“aesthetic”*(e.g.,*new*businesses,*etc.),*affects*endogenous*
amenities*(e.g.,*crime*rate,*school*quality).
45
Environmental%Gentrification:%%
Displacement
• Rising*prices*mean*that*poor*residents*will*choose*to*
exit*for*other*neighborhoods*that*had*previously*
been*less*desirable.

• Poor*residents*might*be*made*worse*off*by*an*
environmental*improvement!

Lessons*from*
Environmental%Gentrification
Variable Estimate
• LA*Family*and*
Gentrification <0.1763*
Neighborhood*Survey*
(LA*FANS). Renter 0.6071***
Gentrification%x%Renter 0.3652***
• Probit estimation*of*the* Hispanic 0.0216
likelihood*of*a*move. Black* 0.1958**
Asian <0.1764
• Gentrification*=*1*if* Age <0.0196***
housing*appreciation*
Kids 0.2338***
rate*(2000!2006) in*
Education 0.0115
census*tract*>*10%.
Income <0.0123**
Constant <0.1363

Qiang,*Timmins*&*Wang*(2017).**“The*Link*Between*Gentrification*and*Displacement*and*the*Effects*of*Displacement*on*Residents*in*
Los*Angeles*County.”
Environmental%Gentrification
…what*happens*to*those*affected*by*gentrification*when*
they*move?

House%Price Air%Pollution School%

Quality
Gentrification 0.1338* <2.2931*** 0.8586***
Renter 0.05286 1.0973** <1.4719*
Renter%x%Gentrification !0.3304** 1.8927** !3.3894**
Mechanisms:%%Siting
Recall*the*Coase'Theorem:

Under'certain'assumptions'(no'transaction'costs'
and'wellNdefined'property'rights),'the'most'efficient'
or'optimal'level'of'an'economic'activity'will'occur,'
because'negotiation'and'market'transactions'will'
ensure'the'optimal'allocation'and'use'of'property'
in'a'free'market.

52
Siting%&%Coase%Theorem
• Residents*should*be*compensated*for*the*risks*they*
bear.
• A*polluting*firm*will*locate*where*it*does*less*damage*
in*order*to*minimize*the*compensation*it*must*pay.
• Factors*influencing*potential*compensation
< number*of*people*affected
< property*values
< residents’*willingness*to*pay*for*environmental*
quality

53
Siting%&%Coase%Theorem
Low*income*! High*MUI ! Low*WTP*to*avoid*pollution.*
Siting%&%Coase%Theorem
Low*income*! High*MUI ! Low*WTP*to*avoid*pollution.*

Coase:**It*is*efficient*to*locate*polluting*firms*in*poor*
neighborhoods.
Siting%&%Coase%Theorem
Low*income*! High*MUI ! Low*WTP*to*avoid*pollution.*

Coase:**It*is*efficient*to*locate*polluting*firms*in*poor*
neighborhoods.

Tiebout:**Poor*people*will*choose*to*move*into*these*
neighborhoods*after*siting.

56
Siting%&%Coase%Theorem
Low*income*! High*MUI ! Low*WTP*to*avoid*pollution.*

Coase:**It*is*efficient*to*locate*polluting*firms*in*poor*
neighborhoods.

Tiebout:**Poor*people*will*choose*to*move*into*these*
neighborhoods*after*siting.

Environmental%injustice%is%really%just%a%reflection%of%
income%inequality.
57
Siting%&%Coase%Theorem
There*may*be*other*reasons*for*disproportionate*
siting*that*are*not*so*efficient…
Siting%&%Collective%Action

In*1984,*the*CA*Waste*Management*Board*commissioned*
Cerrell Associates,*Inc.*to*identify*communities*that*would*
be*less*likely*to*resist*LULU*siting.
The%Cerrell Report%(1984)

“The*formidable*obstacle*to*waste<to<energy*facilities*
is*public*opposition. A*great*deal*of*time,*resources,*
and*planning*could*be*saved*and*political*problems*
avoided,*if*people*who*are*resentful…*could*be*
identified*before*selecting*a*site.**If*this*information*
was*available,*facilities*could*be*placed*in*an*
area…where*people*do*not*find*them*so*offensive”

Cerrell Assoc.,'Inc.'1984.'“Political'difficulties'facing'wasteNtoNenergy'
conversion'plant'siting.”'Rep.'prepared'for'Calif.'Waste'Management'
Board,'Los'Angeles,'CA.

60
Cerrell Report:%Community(Profiles

Most*likely*to*oppose*siting:
< Northeast,*western*regions
< Urban
< Commercial*and*residential
< Young*or*middle<aged
< College<educated
< Liberal/Democrat*(welfare<state*orientation)
< Middle*and*high*income
< History*of*environmental*activism
61
 Information*and*Coasian Bargaining
Shale*Gas*Leases*in*Tarrant*Co.,*Texas
Black Hispanic Income Hispanic%x%
%%Poor%English
Royalty ! + !
Term'Length + +
Insurance Indemnity
Vertical*Pugh ! !
Force Majeure ! +
Groundwater*Protection ! + !
Noise*Restriction !
Traffic*Restriction ! !
Setback*Restriction ! !
Subsurface'Easement + +
Compression Station + ! !
Environment*Clause ! !
Timmins*and*Vissing (2017).*“Environmental*Justice*and*Coasian Bargaining:**The*role*of*race*and*income*in*lease* 63
negotiations*for*shale*gas.”
Causation%vs.%Correlation
• Correlations*identifying*the*existence%of*
environmental*injustices*do*not*distinguish*between:
< Did'polluting'firms'move'into'
poor/minority'
neighborhoods?
< Did'poor/minority'groups'
move'to'polluted'
neighborhoods'where'land'is' http://66.media.tumblr.com/ad77e66cfa84c48c04a58b832
909612f/tumblr_inline_o3skq0BY8b1rnb1ig_500.jpg

cheap?
• Economics*tools*may*be*well<suited*to*identifying*
causal*effects. 64
Siting%v.%Sorting
Been*(1994),**Been*and*Gupta*(1997):
< Use*demographics*at*time*of*siting*versus*changing*
demographics*post<siting.
< Evaluate*sites*from*GAO*(1983)*and*Bullard*(1984)

Depro,*Timmins,*and*O’Neil*(2015):
< Structural*model*of*sorting*decision.
< High*correlation*between*air*toxics*and*Hispanic*goes*
away*if*Hispanics*are*given*whites’*MWTP*to*avoid*air*
toxics*between*2000*– 2010.

65
Mechanism:%%Government(Failure
8/20/2017 Reference Map of Michigan, USA - Nations Online Project

Another*breakdown*of*Coasian bargaining*arises*in*
representative*democracy*when*people*are*not*really*
represented.

Example:*Flint,*MI

Flint

http://www.nationsonline.org/oneworld/map/USA/michigan_map.htm
Reference Map of Michigan State
69
Map is based on a state map of The National Atlas of the USA.
 
Michigan cities and towns More about Michigan and the Lansing Current Weather Conditions Explore more:
Mechanisms:%%Enforcement

• Monitoring*/*Inspections*/*Enforcement

• Pollution*Taxes*/*Fines*/*Pentalties

• Remediation
< identification*of*hazardous*sites
< cleanup*speed
< post*cleanup*standards
< funding*allocation

76
Lavelle(and(Coyle((1992)
Violations%in… Average%Penalty

White*Zip*Codes $153,607

Minority*Zip*Codes $105,028

High*Income Zip*Codes $146,993

Low*Income*Zip*Codes $95,564

M.*Lavelle*and*M.*Coyle*(1992).*“Unequal*Protection:**The*Racial*Divide*in*Environmental*
Conclusions:%%Cost?Benefit(Analysis

Kaldor<Hicks*Potential*
Pareto*Improvement*
Criterion*satisfies*Pareto*
Efficiency*in'expectation.

This*only*works*if*the*same*
people*are*not*the*losers*
every*time*we*implement*a*
policy. https://openclipart.org/detail/26849/scales<of<justice
Conclusions:%%Cost?Benefit(Analysis
The*theories*and*empirical*evidence*associated*with*
environmental*justice*suggest*that*the*same*people*
do*repeatedly*lose…
 REFERENCES

Jonathan Gruber, Public Finance and Public Policy, Fifth Edition,

2016 Worth Publishers, Chapter 10
Hines, James R., and Richard H. Thaler. “Anomalies: The flypaper
effect.” The Journal of Economic Perspectives 9.4 (1995):
217-226.(web)
Hoxby, Caroline M. “Does Competition among Public Schools Benefit
Students and Taxpayers?.” The American Economic Review 90.5
(2000): 1209-1238.(web)
Rothstein, Jesse. "Does Competition Among Public Schools Benefit
Students and Taxpayers? Comment." The American Economic Review
97.5 (2007): 2026-2037.(web)
Tiebout, Charles M. “A pure theory of local expenditures.” The
Journal of Political Economy 64.5 (1956): 416-424.(web)
Comparing provision of club goods when there is
congestion or not

No congestion Congestion
Homogenous agents Monopoly, govern- Need to determine
ment provision, or optimal N as well as
concessionaire can optimal Q
lead to optimal Q
Heterogeneous Monopoly can lead to Clubs of different
agents sub-optimal outcome sizes can be optimal