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Centralized versus Decentralized Taxation of Mobile Polluting Firms

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Author Info
Georges A. Tanguay () (Institut d'Économie Appliquée, École des Hautes Études Commerciales)
Nicolas Marceau () (Center for Research on Economic Fluctuations and Employment, UQAM)

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Abstract

We consider a world in which a mobile polluting firm must locate in one of two regions. The regions differ in two dimensions: their marginal cost of pollution and the production cost of the firm. It is shown that under incomplete information on regional marginal costs of pollution, fiscal competition may lead to the sub-optimal location of the firm. We also show that under incomplete information, a sub-optimal location is less likely under centralized than under decentralized taxation.

Nous étudions un monde dans lequel une firme polluante mobile cherche à se localiser dans une de deux régions données. Les régions présentent des différences quant à leur coût marginal des émissions polluantes et quant à leur coût de production. Il est démontré que dans un contexte d'information incomplète sur les coûts marginaux de pollution des régions, la concurrence fiscale peut mener à une localisation non-optimale de la firme. Il est également démontré que la centralisation de la taxation réduit la probabilité d'une localisation non-optimale.

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File URL: http://www.unites.uqam.ca/eco/CREFE/cahiers/cah122.pdf
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Publisher Info
Paper provided by CREFE, Université du Québec à Montréal in its series Cahiers de recherche CREFE / CREFE Working Papers with number 122.

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Length: 16 pages
Date of creation: Oct 2000
Date of revision:
Handle: RePEc:cre:crefwp:122

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Related research
Keywords: Fiscal Competition; Location; Pollution;

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Find related papers by JEL classification:
R38 - Urban, Rural, and Regional Economics - - Production Analysis and Firm Location - - - Government Policies; Regulatory Policies
H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

References listed on IDEAS
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.:

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  3. Copeland, Brian R & Taylor, M Scott, 1994. "North-South Trade and the Environment," The Quarterly Journal of Economics, MIT Press, vol. 109(3), pages 755-87, August. [Downloadable!] (restricted)
    Other versions:
  4. Hoel, Michael, 1997. " Environmental Policy with Endogenous Plant Locations," Scandinavian Journal of Economics, Blackwell Publishing, vol. 99(2), pages 241-59, June. [Downloadable!] (restricted)
  5. Roger B. Myerson, 1978. "Optimal Auction Design," Discussion Papers 362, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
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  7. Markusen, James R. & Morey, Edward R. & Olewiler, Nancy, 1995. "Competition in regional environmental policies when plant locations are endogenous," Journal of Public Economics, Elsevier, vol. 56(1), pages 55-77, January. [Downloadable!] (restricted)
  8. Dion, Catherine & Lanoie, Paul & Laplante, Benoit, 1998. "Monitoring of Pollution Regulation: Do Local Conditions Matter?," Journal of Regulatory Economics, Springer, vol. 13(1), pages 5-18, January. [Downloadable!] (restricted)
  9. Palmer, Karen & Oates, Wallace E & Portney, Paul R, 1995. "Tightening Environmental Standards: The Benefit-Cost or the No-Cost Paradigm?," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 119-32, Fall. [Downloadable!] (restricted)
  10. Rauscher, Michael, 1994. "Environmental Regulation and the Location of Polluting Industries," CEPR Discussion Papers 1032, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  11. Copeland, Brian R & Taylor, M Scott, 1995. "Trade and Transboundary Pollution," American Economic Review, American Economic Association, vol. 85(4), pages 716-37, September. [Downloadable!] (restricted)
    Other versions:
  12. Black, Dan A & Hoyt, William H, 1989. "Bidding for Firms," American Economic Review, American Economic Association, vol. 79(5), pages 1249-56, December. [Downloadable!] (restricted)
  13. Wayne B Gray, 1997. "Manufacturing Plant Location: Does State Pollution Regulation Matter?," Working Papers 97-8, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
    Other versions:
  14. Chris Doyle & Sweder Wijnbergen, 1994. "Taxation of foreign multinationals: A sequential bargaining approach to tax holidays," International Tax and Public Finance, Springer, vol. 1(3), pages 211-225, October. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. Paul Lanoie & Jérôme Moreau & Georges A. Tanguay, 2001. "Environmental Policy, Public Interest and Political Market," CIRANO Working Papers 2001s-37, CIRANO. [Downloadable!]
  2. Jie He & Paul MAKDISSI & Quentin WODON, 2007. "Corruption, Inequality, and Environmental Regulation," Cahiers de recherche 07-13, Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke. [Downloadable!]
  3. Georges A. Tanguay & Paul Lanoie & Jérôme Moreau, 2001. "Environmental Policy, Public Interest and Political Market," Cahiers de recherche 01-01, HEC Montréal, Institut d'économie appliquée. [Downloadable!]
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