Handbook on Experimental Economics and the Environment
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Handbook on Experimental Economics and the Environment

Edited by John A. List and Michael K. Price

Laboratory and field experiments have grown significantly in prominence over the past decade. The experimental method provides randomization in key variables therefore permitting a deeper understanding of important economic phenomena. This path-breaking volume provides a valuable collection of experimental work within the area of environmental and resource economics and showcases how laboratory and field experiments can be used for both positive and normative purposes.
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Chapter 13: Fixed instruments to cope with stock externalities: an experimental evaluation

Gaston Giordana and Marc Willinger


Managing the exploitation of renewable natural resources, designing policies aimed at reducing water or air pollution, or fighting against global warming, requires taking into account stock externalities. Unlike static externalities whose detrimental effects disappear after some time, stock externalities generate persistent effects due to a particular accumulation process. Examples include emissions of greenhouse gases, groundwater withdrawals, fisheries exploitation and so on. In contrast to static externalities, which may be remedied by policies correcting inefficient decisions, for stock externalities no instantaneous policy is capable to remediate immediately the damage created in previous periods. Once the resource stock has been deteriorated current policies can only curb the dynamic externalities beyond the current period. Empirical and experimental findings showed that in a dynamic environment, resource exploitation can lead to dramatic inefficiencies, enhancing the need for effective policies to cope with them (Clark, 1974; Herr et al., 1997; Moxnes, 1998; Giordana, 2007). In this chapter, we analyse policy instruments targeted to achieve a second-best withdrawal path in the case of a common pool renewable resource.

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