BACKWARD INCIDENCE OF POLLUTION-CONTROL - SOME COMPARATIVE STATICS IN GENERAL EQUILIBRIUM

The backward incidence of stronger pollution controls onto the factors of production is examined in a two sector (one polluting, one not), general equilibrium model. The real returns to labor and capital are found to move in opposite directions that depend on the factor intensity of the nonpolluting sector. The magnitudes of these effects are shown dependent upon the degree of factor intensity in that sector, the ease with which pollution can be removed from the effluent, the ease with which capital and labor can be substituted in either sector, and the price elasticities of demand for the sectors' products. © 1979.