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Locational Competition and the Environment: Should Countries Harmonize Their Environmental Policies?

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Author Info
William D. Nordhaus () (Cowles Foundation, Yale University)

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Abstract

In debates about economic unification or trade liberalization, it is often asked whether harmonization should go beyond taxes and macroeconomic policies to include regulations, particularly environmental policy. This issue also arises when countries, states, and cities engage in competition for plants, jobs, or exports in what we might call "locational competition." This essay analyzes locational competition with particular reference to environmental policy. The conclusions are the following: First, economic efficiency requires harmonization of policies for global environmental issues; second, for local public goods or externalities, there is a strong presumptive case against harmonization; and finally that a competitive "race to the bottom" in environmental policies is inconsistent with countries' following their own economic self-interests.

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Publisher Info
Paper provided by Cowles Foundation, Yale University in its series Cowles Foundation Discussion Papers with number 1079.

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Length: 36 pages
Date of creation: Sep 1994
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Publication status: Published in Horst Sieber, ed., Locational Competition in the World Economy: Symposium 1994, 1995, pp. 261-287
Handle: RePEc:cwl:cwldpp:1079

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Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA

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  1. Cropper, Maureen L & Oates, Wallace E, 1992. "Environmental Economics: A Survey," Journal of Economic Literature, American Economic Association, vol. 30(2), pages 675-740, June. [Downloadable!] (restricted)
  2. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416. [Downloadable!] (restricted)
  3. Dale W. Jorgenson & Peter J. Wilcoxen, 1990. "Environmental Regulation and U.S. Economic Growth," RAND Journal of Economics, The RAND Corporation, vol. 21(2), pages 314-340, Summer. [Downloadable!] (restricted)
  4. Robert K. Kaufmann & Peter Pauly & Julie Sweitzer, 1993. "The Effects of NAFTA on the Environment," The Energy Journal, International Association for Energy Economics, vol. 14(3), pages 217-240.
  5. Whalley, John, 1991. "The Interface between Environmental and Trade Policies," Economic Journal, Royal Economic Society, vol. 101(405), pages 180-89, March. [Downloadable!] (restricted)
  6. Weitzman, Martin L, 1974. "Prices vs. Quantities," Review of Economic Studies, Blackwell Publishing, vol. 41(4), pages 477-91, October. [Downloadable!] (restricted)
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  1. Henry van Egteren & R. Smith, 2002. "Environmental Regulations Under Simple Negligence or Strict Liability," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 21(4), pages 367-394, April. [Downloadable!] (restricted)
  2. Karp, Larry & Zhao, Jinhua & Sacheti, Sandeep, 1999. "The Uncertain Benefits of Environmental Reform in Open Economies," Staff General Research Papers 4043, Iowa State University, Department of Economics. [Downloadable!]
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