Abstract:
Pollution from industries, has been rapidly increasing over years, creating more burden to government in reducing pollution. To cope with this problem, polluter should be charged to make equitability to overall social. This thesis, therefore, aims at finding the appropiate environmental charge for the wastewater disposal of tannery industry in 1999. The Cobb-Douglas production function model is used to estimate the relationship between the output and the relevant inputs consisting of raw skin, chemical, labor and water in order to find the marginal cost of each input and the pollution charge fee at the end. The basic assumption is that the more production, the more pollution. Analogous to that idea, the pollution charge, which the polluter have to pay, is determined by the value-added of pollutant they make which is the key mean to reduce the undesireable externality. The Biological Oxygen Demand (BOD) is used as a proxy of pollutant in the study. Thus, in the industrial producer's view, to reduce the BOD or pollutant is to accept the opportunity cost of producing more. The result from this study show that, only raw skin and chemical have significantly explain the output at 95% of confidence level; wheras, the rest input -- labor and water -- have significance at under the 90% of confidence level. In addition, the study finds that the industry is in the state of increasing return to scale equaled to 2.013. The wastewater polluter should be charged at 1,680.04 bath per kilogram of BOD.