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Tariffs and the adoption of clean technology under asymmetric information

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  • Rodney D. Ludema
  • Taizo Takeno

Abstract

This paper examines the effect of a tariff on the decision of a foreign monopolist to adopt `clean' technology, which reduces the flow of a negative cross-border externality. The clean technology increases the marginal cost of production relative to the dirty technology, but only the firm knows the extent of the increase. Under complete information, despite its protectionist motivation, the importing country's optimal tariff induces the firm to adopt the clean technology if and only if it is globally efficient to do so. Under incomplete information, this efficiency property is disrupted, and the firm biases its choice in favour of dirty technology.

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Bibliographic Info

Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 40 (2007)
Issue (Month): 4 (November)
Pages: 1100-1117

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Handle: RePEc:cje:issued:v:40:y:2007:i:4:p:1100-1117

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References

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  1. Markusen, James R., 1975. "International externalities and optimal tax structures," Journal of International Economics, Elsevier, vol. 5(1), pages 15-29, February.
  2. Choi, J.P., 1992. "Optimal Tariffs and the Choice of Technology Discriminatory Tariffs vs. the "Most Favored Nation" Clause," Discussion Papers 1992_46, Columbia University, Department of Economics.
  3. Ludema, Rodney D & Wooton, Ian, 1997. "International Trade Rules and Environmental Cooperation under Asymmetric Information," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(3), pages 605-25, August.
  4. Alberto Gallegos & Pierre Regibeau, 2004. "Managed Trade, Trade Liberalisation and Local Pollution," Economics Discussion Papers 580, University of Essex, Department of Economics.
  5. Crowley, Meredith A., 2006. "Do safeguard tariffs and antidumping duties open or close technology gaps?," Journal of International Economics, Elsevier, vol. 68(2), pages 469-484, March.
  6. Ludema, R.D. & Wooton, I., 1992. "Cross-Border Externalities and trade Liberalization: The Strategic Control of Pollution," UWO Department of Economics Working Papers 9202, University of Western Ontario, Department of Economics.
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Cited by:
  1. Takeshi Iida & Kenji Takeuchi, 2011. "Does free trade promote environmental technology transfer?," Journal of Economics, Springer, vol. 104(2), pages 159-190, October.
  2. Robert W. Staiger & Alan O. Sykes, 2009. "International Trade and Domestic Regulation," NBER Working Papers 15541, National Bureau of Economic Research, Inc.
  3. Takeshi Iida & Kenji Takeuchi, 2010. "Policy-Induced Environmental Technology Transfer," Discussion Papers 1008, Graduate School of Economics, Kobe University.
  4. Ben Youssef, Slim, 2008. "Adoption of a Cleaner Technology by a Monopoly Under Incomplete Information," MPRA Paper 9879, University Library of Munich, Germany, revised Jul 2008.

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