Superiority and Mechanism of an Input Tax in the Chlordecone Case
In the chlordecone contamination case, policies targeting the final output, such as taxing bananas, were less effective than targeting the harmful input directly. A tax on chlordecone, set equal to its marginal external cost, would raise its price to its marginal social cost. This corrected price signal would force plantations to internalize the full cost of the pesticide, motivating them to reduce its use or switch to cleaner alternatives. While both an input tax and an output tax would reduce plantation profits and pollution costs, the input tax provides a better outcome for the plantations, and potentially for the fishermen as well.
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The Economy 2.0 Microeconomics @ CORE Econ
Ch.10 Market successes and failures: The societal effects of private decisions - The Economy 2.0 Microeconomics @ CORE Econ
Introduction to Microeconomics Course
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