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The Coase Theorem and Environmental Externalities: Theory, Evidence, and Policy Recommendations
Subject area: Arts, Social Sciences and Humanities · Area of research: Economics - Coarse Theorem
Abstract
The Coase Theorem is key to environmental economics and regulation. Many people question whether the theorem can be used to solve real-world problems. By evaluating both theories and empirical reviews, the study will be focused on whether negotiating privately can effectively resolve environmental issues. The study will test the assumptions around the coarse theorem and the practical applications of the Coase theorem about ecological problems, and differentiate the situations in which a polluter pays a pollute and vice versa. The practical examples are however limited by transaction costs, legal costs, asymmetric information, and the magnitude of the specific environmental problems. The policy recommendations proposed are to emphasize the solutions that involve both the Coasian agreements and regulatory frameworks.
Keywords
Property rights, bargaining, transaction cost.
References
[1] Allen, D. W. (1991). What are transaction costs? Rsch. in L. & Econ., 14, 1.
[2] Coase, R. H. (2013). The problem of social cost. The Journal of Law and Economics, 56(4), 837-877.
[3] Deryugina, T., Moore, F., & Tol, R. S. (2021). Environmental applications of the Coase Theorem. Environmental Science & Policy, 120, 81-88.
[4] Lai, L. W. C. (2007). 'The Problem of Social Cost': the Coase theorem and externality explained: Using simple diagrams and examples to illustrate the role of land use planning in tackling externalities. Town Planning Review, 78(3), 335-368.
[5] Libecap, G. D. (2003). Contracting for property rights. Property rights: Cooperation, conflict, and law.
[6] Regan, D. H. (1972). The problem of social cost revisited. The Journal of Law and Economics, 15(2), 427-437.
[7] Yousuf, A. (2017). Transaction costs: a conceptual framework.
How to cite this paper
@article{1708596,
author = {Nashon Gumbo Obiero, Dr. Yasin Kuso Ghabon},
title = {The Coase Theorem and Environmental Externalities: Theory, Evidence, and Policy Recommendations},
journal = {Iconic Research And Engineering Journals},
year = {2025},
volume = {8},
number = {11},
pages = {1317-1321},
issn = {2456-8880},
url = {https://www.irejournals.com/formatedpaper/1708596.pdf},
abstract = {The Coase Theorem is key to environmental economics and regulation. Many people question whether the theorem can be used to solve real-world problems. By evaluating both theories and empirical reviews, the study will be focused on whether negotiating privately can effectively resolve environmental issues. The study will test the assumptions around the coarse theorem and the practical applications of the Coase theorem about ecological problems, and differentiate the situations in which a polluter pays a pollute and vice versa. The practical examples are however limited by transaction costs, legal costs, asymmetric information, and the magnitude of the specific environmental problems. The policy recommendations proposed are to emphasize the solutions that involve both the Coasian agreements and regulatory frameworks.},
keywords = {Property rights, bargaining, transaction cost.},
month = {May},
}