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Southern Export of Dirty "Variety" and Optimality of Environmental Standards : Case of Consumption Pollution

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  • Rajat Acharyya

    (CUHK - City University Hong Kong)

Abstract

This paper examines the optimality of environmental standards that are often observed to be imposed by the importing North on exporting South. In the context of goods differentiated in terms of environmental quality and the degree of consumption pollution they generate, consumers' willingness-to-pay varying with such quality and being different across income groups, we show that : (1) competitive environmental qualities are sub-optimal; (2) environmental-quality dependent consumption tax is the first best policy; and (3) when South has a cost advantage in dirty varities, the second-best policy for North is to lower minimum environmental standard from the autarchic level of minimum standard.

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File URL: http://www.eaber.org/node/21749
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Bibliographic Info

Paper provided by East Asian Bureau of Economic Research in its series Governance Working Papers with number 21749.

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Date of creation: Mar 2011
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Handle: RePEc:eab:govern:21749

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Keywords: Environmental quality choice; consumption pollution; environmental standard;

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