Martin, RalfMuûls, MirabellePreux, Laure B. deWagner, Ulrich J2015-05-112015-05-112014-08Martin, R., de Preux, L.B., y Wagner, U.J., "Industry Compensation Under Relocation Risk: A Firm-level Analysis of the EU Emissions Trading Scheme", American Economic Review, 2014, v. 104, n. 8, pp. 2482-25080002-8282http://hdl.handle.net/10016/20685When regulated firms are offered compensation to prevent them from relocating, efficiency requires that payments be distributed across firms so as to equalize marginal relocation probabilities, weighted by the damage caused by relocation. We formalize this fundamental economic logic and apply it to analyzing compensation rules proposed under the EU Emissions Trading Scheme, where emission permits are allocated free of charge to carbon intensive and trade exposed industries. We show that this practice results in substantial overcompensation for given carbon leakage risk. Efficient permit allocation reduces the aggregate risk of job loss by more than half without increasing aggregate compensationapplication/pdfeng© American Economic AssociationIndustry compensationIndustrial relocationEmissions tradingPermit allocationEU ETSFirm dataresearch articleH23H25Q52Q54F18Economíaopen access248282508American Economic Review104