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analyze the effects of the following government policies on the

Pollution Controls
Natural Monopolies
and Antitrust Regulation

When analyzing these policies, include some discussion of the following points when appropriate: What is the purpose of the policy? Why is the policy necessary? The welfare of consumers, producers, and society (the winners and losers) before and after the policy The distribution of costs and benefits Does government intervention improve the situation? thank you
analyze the effects of the following government policies on the market equilibrium. Increases in the Minimum Wage Restrictions on International Trade Pollution Controls Natural Monopolies and Antitrust Regulation

750 minimum words with an introduction and a conclusion.

Explanation / Answer

In recent years, much of the debate over the cost of pollution control policies has centered on their aggregate cost-effectiveness and not on their distributive welfare incidence. Yet, the distributive outcome of any policy that affects relative prices constitutes an important source of concern for policy makers. Concern for the incidence of the costs of green-house gas (GHG) abatement policies can be expressed from at least two perspectives: industries and households. With the ?rst perspective, the concern is over the incidence of abatement costs across industries; with the second perspective, it is the policies’ welfare incidence on households that is the main source of concern. The interest over the joint incidence of pollution control policies has been growing among researchers. A recent body of literature has begun to examine the distributive impact across industries of the cost of pollution control policies. Dissou (2006) and Goulder, Parry, Williams III, and Burtraw (1999) are just a few examples. The literature on the household incidence of environmental taxes is also increasingly abundant — see for instance Parry, Sigman, Walls, and Williams III (2005) for an interesting and extensive review of the literature. Most studies suggest that environmental taxes tend to be regressive. The main reason for this is that lower income households usually spend a larger share of their income on energy goods than more af?uent households; increasing taxes on energy goods is thus proportionately more harmful to poorer households. Many such studies use a partial equilibrium analysis in which it is assumed not only that energy taxes are fully passed through to consumers, but also that these taxes have no effects on the prices of other goods. West and Williams (2004) and Bento, Goulder, Henry, Jacobsen, and von Haefen (2005) are a few examples of studies using such a partial equilibrium approach. Considering the signi?cant share of energy goods in the production cost of other consumption goods, the above conclusion on the regressive nature of envi- ronmental taxes could certainly be quali?ed in a more general equilibrium setting. For example, Solow (1985) and Uri and Boyd (1997) ?nd that when the indirect effects, i.e., the spillover and feedback effects from other industries, of energy taxes, such as a thermal tax, are taken into consideration, energy taxes tend to be proportional — as opposed to being regressive when these effects are ignored. Accounting for the indirect effects of energy taxes on other goods through input- output tables, Casler and Ra?qui (1993) also ?nd that these taxes are then only mildly regressive. ANTI-TRUST POLICIES The historical background of anti-trust laws is rooted in the decades following the Civil War. When the corporate form of business began to develop and monopolies were formed in industries such as petroleum, meatpacking, railroads, sugar, etc., questionable tactics were used by these firms, and popular sentiment turned against them. Regulatory agencies were formed to control natural monopoly. Antitrust legislation was passed to inhibit the growth of monopolies in other industries. The Sherman Act of 1890 was the first major law and is still the cornerstone of antitrust legislation. It contains two major provisions: 1. Contracts or combinations in restraint of trade or commerce among the several states or with foreign nations are illegal. 2. Every person who shall monopolize or attempt to monopolize any part of the trade or commerce among the states or with foreign nations shall be deemed guilty of misdemeanor. Firms found violating either provision could be ordered dissolved by the courts or prohibited from unlawful practices. Fines and imprisonment were possible, and injured parties could sue for damage.

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