How Standards Drive Taxes: The Political Economy of Tailpipe Pollution
AbstractTo control tailpipe pollution, governments often use environmental product standards and consumption taxes in conjunction (for example, the use of fuel economy standards and gasoline taxes to restrict automobile pollution in the US). Further, the choice of standards and consumption taxes is often independently influenced by special interests. For example, domestic producers have the incentive to influence environmental product standards, and likewise, domestic consumers have the incentive to influence the choice of the consumption tax. In this paper we explore the political link between environmental standards and consumption taxes in the presence of independent special interests. We find that despite the independence of special interests, the political outcome is inextricably linked. This political link is different from the welfare maximizing second-best link usually expected between two related policies, and is crucial in correctly anticipating policy outcomes. Specifically, we find that the government's choice of an environmental standard influences political incentives in the choice of the consumption tax. As the environmental standard falls, a higher demand for the environmentally damaging product develops. This higher demand increases the incentives for consumers to lobby for lower consumption tax. Under certain conditions, this political link is large enough to result in a complementary relationship between the two policies in equilibrium. The complementary relationship implies that a lower standard results in a lower consumption tax and vice versa when the standard is higher.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by De Gruyter in its journal The B.E. Journal of Economic Analysis & Policy.
Volume (Year): 7 (2007)
Issue (Month): 1 (January)
Contact details of provider:
Web page: http://www.degruyter.com
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Johan F.M. Swinnen & Thijs Vandemoortele, 2009.
"Trade, Development, and the Political Economy of Public Standards,"
LICOS Discussion Papers
23609, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
- Swinnen, Johan F.M. & Vandemoortele, Thijs, 2009. "Trade, Development, and the Political Economy of Public Standards," 113th Seminar, September 3-6, 2009, Chania, Crete, Greece 58139, European Association of Agricultural Economists.
- Swinnen, Jo & Vandemoortele, Thijs, 2009. "Trade, development, and the political economy of public standards," Open Access publications from Katholieke Universiteit Leuven urn:hdl:123456789/223977, Katholieke Universiteit Leuven.
- Swinnen, Jo & Vandemoortele, Thijs, 2011.
"Trade and the political economy of food standards,"
Open Access publications from Katholieke Universiteit Leuven
urn:hdl:123456789/289067, Katholieke Universiteit Leuven.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Golla).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.