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Tariffs and the adoption of clean technology under asymmetric information

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Author Info
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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File URL: http://economics.ca/cgi/xms?jab=v40n4/CJEv40n4p1100.pdf
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Publisher 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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Find related papers by JEL classification:
F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
F18 - International Economics - - Trade - - - Trade and Environment

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This page was last updated on 2009-12-21.

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