ABSTRACT
This chapter shows that environmental quality regulation may enhance producer wealth while it simultaneously reduces an externality problem by restricting access to common property. The potential for intraindustry transfers presents an amendment to the economic theory of regulation—there is a demand for regulation to redistribute wealth among competing firms in the industry. In order for the regulations to be effective in generating increased profits for producer groups, they will likely be developed on an industry by industry basis. The chapter discusses environmental quality regulation as a means of wealth redistribution within an industry with particular emphasis on two anomalies in the actual practice of regulation—technology-specific regulation and the inalienability of pollution permits. Nontransferability can be a response to positive monitoring costs, and it can result in wealth transfers among producer groups. The chapter presents empirical evidence using financial market analysis of different regulations, the Occupational Safety and Health Agency cotton-dust standards and the Environmental Protection Agency prevention of significant deterioration.
