Strategic Environmental Policy under Free Entry of Firms
AbstractWith direct trade barriers banned, governments may be tempted to use indirect policy tools to interfere with trade, such as environmental taxes. The author uses a model of an endogenous market structure, where the number of firms is determined by a zero-profit condition in one country but is exogenously given in the other country, to show that a government harboring a fixed number of firms fails to affect aggregate supply, and therefore has little scope for improving domestic environmental quality (if pollution is transboundary). Moreover, owing to the absence of a terms-of-trade effect, it diverts from the classical strategic tax rule. The author argues that both governments arguably fix their equilibrium emission taxes "too low," meaning that tax competition plausibly leads to "ecological dumping." Copyright 2003 Blackwell Publishing Ltd..
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Review of International Economics.
Volume (Year): 11 (2003)
Issue (Month): 2 (05)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0965-7576
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- Requate, Till, 2005. "Environmental Policy under Imperfect Competition : A Survey," Economics Working Papers 2005,12, Christian-Albrechts-University of Kiel, Department of Economics.
- Fabio Antoniou & Panos Hatzipanayotou & Phoebe Koundouri, 2010.
"Tradable Permits vs Ecological Dumping,"
Environmental Economy and Policy Research Working Papers
50.2010, University of Cambridge, Department of Land Economics, revised 2010.
- Phoebe Koundouri & Fabio Antoniou & Panos Hatzipanayotou, 2009. "Tradable Permits vs Ecological Dumping," DEOS Working Papers 1002, Athens University of Economics and Business.
- Panos Hatzipanayotou & Fabio Antoniou & Phoebe Koundouri, 2010. "Tradable Permits vs Ecological Dumping," Working Papers 2010.2, Fondazione Eni Enrico Mattei.
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