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Game models of environmental policy in an open economy

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Author Info

  • Amitrajeet A. Batabyal

    (Department of Economics, Utah State University, Logan, UT 84322-3530, USA)

Abstract

In this paper we study some aspects of the question of international environmental regulation from a game theoretic perspective. We address two broad questions. First, we examine the circumstances under which the pursuit of unilateral environmental policy by a country in a Stackelberg game, will make that country worse off. Second, we study the effects of environmental regulation by means of alternate price control instruments in a Stackelberg game when there is transboundary pollution. We find that there are plausible theoretical circumstances in which the pursuit of unilateral environmental policy is not a good idea. Further, we show that in choosing between alternate pollution control instruments, national governments typically face a tradeoff between instruments which correct more distortions but are costly to implement and instruments which correct fewer distortions but are less costly to implement. In particular, we obtain a dominance result for a tariff policy; this result favors the use of tariffs from an informational standpoint alone.

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Bibliographic Info

Article provided by Springer in its journal The Annals of Regional Science.

Volume (Year): 30 (1996)
Issue (Month): 2 ()
Pages: 185-200

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Handle: RePEc:spr:anresc:v:30:y:1996:i:2:p:185-200

Note: Received: January 1995 / Accepted: September 1995
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  1. Pethig, Rudiger, 1976. "Pollution, welfare, and environmental policy in the theory of Comparative Advantage," Journal of Environmental Economics and Management, Elsevier, vol. 2(3), pages 160-169, February.
  2. Merrifield, John D., 1988. "The impact of selected abatement strategies on transnational pollution, the terms of trade, and factor rewards: A general equilibrium approach," Journal of Environmental Economics and Management, Elsevier, vol. 15(3), pages 259-284, September.
  3. Markusen, James R., 1975. "International externalities and optimal tax structures," Journal of International Economics, Elsevier, vol. 5(1), pages 15-29, February.
  4. Markusen James R. & Morey Edward R. & Olewiler Nancy D., 1993. "Environmental Policy when Market Structure and Plant Locations Are Endogenous," Journal of Environmental Economics and Management, Elsevier, vol. 24(1), pages 69-86, January.
  5. Tobey, James A, 1990. "The Effects of Domestic Environmental Policies on Patterns of World Trade: An Empirical Test," Kyklos, Wiley Blackwell, vol. 43(2), pages 191-209.
  6. McGuire, Martin C., 1982. "Regulation, factor rewards, and international trade," Journal of Public Economics, Elsevier, vol. 17(3), pages 335-354, April.
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Cited by:
  1. Jeroen C.J.M. van den Bergh & Peter Nijkamp, 1997. "Optimal Growth, Coordination and Sustainability in the Spatial Economy," Tinbergen Institute Discussion Papers 97-104/3, Tinbergen Institute.
  2. Jeroen C.J.M. van den Bergh & Peter Nijkamp, 1997. "Optimal Growth, Coordination and Sustainability in the Spatial Economy," Tinbergen Institute Discussion Papers 97-104/3, Tinbergen Institute.
  3. repec:dgr:uvatin:2097104 is not listed on IDEAS
  4. Lee, Dug Man & Batabyal, Amitrajeet A., 2002. "Dynamic environmental policy in developing countries with a dual economy," International Review of Economics & Finance, Elsevier, vol. 11(2), pages 191-206, May.
  5. Amitrajeet Batabyal, 1994. "On the possibility of attaining environmental and trade objectives simultaneously," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 4(6), pages 545-553, December.

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