I build an empirical model of the South American agricultural sector to show how environmental policy is transmitted along a supply chain when regulation at the externality’s source is infeasible. Given obstacles to a carbon tax on farmers, I show how alternative market-based policies downstream agribusiness taxes reduce upstream emissions but their effectiveness is limited by international leakage and domestic mistargeting, while also being regressive. Agribusiness monopsony power worsens targeting by lowering pass-through to upstream farmers in uncompetitive and emissions-intense regions, thus eroding the Pigouvian signal where social cost is highest. By contrast, command-and-control tools perform robustly when markets face pre-existing distortions.
Seminars·May 7, 2024
Tomás Domínguez-Iino, University of Chicago
- Date and Time: –
Efficiency and Redistribution in Environmental Policy: An Equilibrium Analysis of Agricultural Supply Chains