The Korean Journal of Economic Studies
Endogenous Location Choice of Two Industries in Tradable Permit Contests
Jong Hwa Lee (Korea Institute for Defense Analyses) and Pan Sang Kang (Sungkyunkwan University)Year 2018Vol. 66No. 2
This paper explores the determination of an optimal value of preassignedpermit when polluting firms strategically choose their location. Thecomposition of industry under the tradable permit system could be different bythe value of preassigned permit. The results of this paper are summarized asfollows. First, the social welfare of the tradable permit system implementingcountry is maximized when the bigger industry is located in the country while,the smaller industry is relocated to another country. Next, the social welfareof the country could be maximized by encouraging within industry competitionfor the permit rather than between industry competition.