Environmental capital flight and pollution tax
AbstractThis paper analyzes the impacts of a production pollution tax on environmental capital flight and national product in a two-country static general equilibrium model with two-way foreign investment. It is assumed that the capital input in both countries is a composite good of domestic and imported capital. And pollution is assumed to originate in the production process. The productivity of capital in each country is negatively (or positively) related to the worldwide aggregate emissions. The analysis shows that when a domestic pollution tax is levied, domestic capital outflows increase and foreign capital inflows decrease for sufficiently high elasticities of substitution between labor (immobile input) and capital (mobile input) in both countries. Moreover, with negative transnational externalities, increases of a domestic pollution tax reduce domestic production and increase foreign production. The difficulty of substitution between immobile and mobile inputs hinders the optimal allocation of worldwide capital and national product. In this paper, the optimal pollution tax is based on global welfare maximization, not on global income maximization, taking into consideration the impact of income change on individual welfare. Therefore, an optimal pollution tax in the developing country should be lower for a given rate of pollution. Copyright Kluwer Academic Publishers 1995
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.
Bibliographic InfoArticle provided by European Association of Environmental and Resource Economists in its journal Environmental & Resource Economics.
Volume (Year): 5 (1995)
Issue (Month): 3 (April)
Contact details of provider:
Web page: http://www.springerlink.com/link.asp?id=100263
Production pollution tax; environmental capital flight; global environmental change; global welfare maximization;
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Carraro, Carlo & Siniscalco, Domenico, 1991.
"Strategies for the International Protection of the Environment,"
CEPR Discussion Papers
568, C.E.P.R. Discussion Papers.
- Carraro, Carlo & Siniscalco, Domenico, 1993. "Strategies for the international protection of the environment," Journal of Public Economics, Elsevier, vol. 52(3), pages 309-328, October.
- Bovenberg, A Lans, 1989.
"The Effects of Capital Income Taxation on International Competitiveness and Trade Flows,"
American Economic Review,
American Economic Association, vol. 79(5), pages 1045-64, December.
- Bovenberg, A.L., 1989. "The effects of capital income taxation on international competitiveness and trade flows," Open Access publications from Tilburg University urn:nbn:nl:ui:12-152951, Tilburg University.
- Hoel, Michael, 1991. "Global environmental problems: The effects of unilateral actions taken by one country," Journal of Environmental Economics and Management, Elsevier, vol. 20(1), pages 55-70, January.
- Bovenberg, A.L., 1986.
"Capital income taxation in growing open economies,"
Open Access publications from Tilburg University
urn:nbn:nl:ui:12-152946, Tilburg University.
- Kosobud, Richard F & Daly, Thomas A, 1984. "Global Conflict or Cooperation over the CO2 Climate Impact?," Kyklos, Wiley Blackwell, vol. 37(4), pages 638-59.
- Lawrence H. Goulder & John B. Shoven & John Whalley, 1983. "Domestic Tax Policy and the Foreign Sector: The Importance of Alternative Foreign Sector Formulations to Results from a General Equilibrium Tax Analysis Model," NBER Chapters, in: Behavioral Simulation Methods in Tax Policy Analysis, pages 333-368 National Bureau of Economic Research, Inc.
- William D. Nordhaus, 1992.
"Rolling the 'Dice': An Optimal Transition Path for Controlling Greenhouse Gases,"
Cowles Foundation Discussion Papers
1019, Cowles Foundation for Research in Economics, Yale University.
- Nordhaus, William D., 1993. "Rolling the 'DICE': an optimal transition path for controlling greenhouse gases," Resource and Energy Economics, Elsevier, vol. 15(1), pages 27-50, March.
- Lawrence H. Goulder & John B. Shoven & John Whalley, 1982. "Domestic Tax Policy and the Foreign Sector: The Importance of Alternative Foreign Sector Formulations to Results from a General Equilibrium," NBER Working Papers 0919, National Bureau of Economic Research, Inc.
- repec:old:wpaper:338 is not listed on IDEAS
- Christoph Böhringer & Victoria Alexeeva-Talebi, 2011. "Unilateral climate policy and competitiveness: The implications of differential emission pricing," Working Papers V-338-11, University of Oldenburg, Department of Economics, revised Jun 2011.
- Michael Rauscher, 2001. "International Factor Movements, Environmental Policy, and Double Dividends," NBER Chapters, in: Behavioral and Distributional Effects of Environmental Policy, pages 187-216 National Bureau of Economic Research, Inc.
- Rauscher, Michael, 2001. "International Trade, Foreign Investment, and the Enivronment," Thuenen-Series of Applied Economic Theory 29, University of Rostock, Institute of Economics.
- Bogmans, C.W.J., 2011. "Essays on international trade and the environment," Open Access publications from Tilburg University urn:nbn:nl:ui:12-4643188, Tilburg University.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Guenther Eichhorn) or (Christopher F. Baum).
If references are entirely missing, you can add them using this form.