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Transboundary pollution, R&D spillovers and international trade

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  • Slim Ben Youssef

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Abstract

We consider a symmetric three-stage game played by a pair of regulator-firm hierarchies to capture the scale and technology effects. Each firm produces one good sold on the market. The production process generates pollution characterized by a fixed emission/output ratio, and cross-borders. Firms can invest in R&D in order to lower their emission/output ratio, and this activity is characterized by positive R&D spillovers. We show that R&D spillovers and the competition of firms on the common market help non-cooperating countries to internalize transboundary pollution more efficiently. Consequently, in most cases, when the positive externality increases, the levels of R&D and production increase while pollution decreases, implying an increase of the social welfare. However, in some other cases, pollution under common market increases with the R&D externality implying a decrease of the social welfare. Opening markets to the international trade leads to more investment in R&D and more production. In most cases, pollution under common market is lower than under autarky, implying a greater social welfare. Nevertheless, in some other cases, pollution under common market is higher than under autarky implying that opening markets deteriorates social welfare.

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Bibliographic Info

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

Volume (Year): 43 (2009)
Issue (Month): 1 (March)
Pages: 235-250

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Handle: RePEc:spr:anresc:v:43:y:2009:i:1:p:235-250

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Keywords: D62; F12; H21; O32;

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References

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  1. Kjetil Bjorvatn & Guttorm Schjelderup, 2002. "Tax Competition and International Public Goods," International Tax and Public Finance, Springer, vol. 9(2), pages 111-120, March.
  2. Barbara J. Spencer & James A. Brander, 1982. "International R&D Rivalry and Industrial Strategy," Working Papers 518, Queen's University, Department of Economics.
  3. d'ASPREMONT, Claude & JACQUEMIN, Alexis, . "Cooperative and noncooperative R&D in duopoly with spillovers," CORE Discussion Papers RP -823, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Santore, Rudy & Robison, H. David & Klein, Yehuda, 2001. "Strategic state-level environmental policy with asymmetric pollution spillovers," Journal of Public Economics, Elsevier, vol. 80(2), pages 199-224, May.
  5. Werner Antweiler & Brian R. Copeland & M. Scott Taylor, 1998. "Is Free Trade Good for the Environment?," NBER Working Papers 6707, National Bureau of Economic Research, Inc.
  6. Copeland, Brian R & Taylor, M Scott, 1995. "Trade and Transboundary Pollution," American Economic Review, American Economic Association, vol. 85(4), pages 716-37, September.
  7. Cremer, Helmuth & Gahvari, Firouz, 2004. "Environmental taxation, tax competition, and harmonization," Journal of Urban Economics, Elsevier, vol. 55(1), pages 21-45, January.
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Citations

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Cited by:
  1. Ben Youssef, Slim & Dinar, Zeineb, 2009. "Régulation d'un duopole et R&D environnementale
    [Regulation of a duopoly and environmental R&D]
    ," MPRA Paper 20596, University Library of Munich, Germany, revised Feb 2010.
  2. Golombek, Rolf & Hoel, Michael, 2004. "Climate Agreements and Technology Policy," Memorandum 11/2004, Oslo University, Department of Economics.
  3. Ben Jebli, Mehdi & Ben Youssef, Slim, 2013. "Timing of adoption of clean technologies, transboundary pollution and international trade," Economics Discussion Papers 2013-50, Kiel Institute for the World Economy.
  4. Golombek, Rolf & Hoel, Michael, 2004. "Unilateral emission reductions when there are cross -country technology spillovers," Memorandum 17/2004, Oslo University, Department of Economics.
  5. Ben Youssef, Slim & Zaccour, Georges, 2014. "Absorptive Capacity, R&D Spillovers, Emissions Taxes and R&D Subsidies," Strategic Behavior and the Environment, now publishers, vol. 4(1), pages 41-58, April.
  6. Dinar, Zeineb, 2013. "Transboundary pollution, R&D spillovers, absorptive capacity and international trade," Economics Discussion Papers 2013-23, Kiel Institute for the World Economy.
  7. Ben Youssef, Slim, 2009. "Transboundary Pollution and Absorptive Capacity," MPRA Paper 17158, University Library of Munich, Germany.

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