Environmental regulation and the location of polluting industries
AbstractDoes international tax competition in the environmental field lead to undesirably low levels of environmental regulation and to unacceptable disruptions of environmental quality? The paper tries to answer this question in a non-competitive partial-equilibrium framework. There is one firm that wishes to establish a plant in one of n countries. The paper shows that tax competition may lead to emission taxes that are either too low or too high. They may be so high that the investment is not undertaken although this would be optimal if the countries cooperated. On the other end of the spectrum, a scenario in which taxes are driven to zero becomes possible if there are substantial transfrontier pollution effects.
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Bibliographic InfoPaper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 639.
Date of creation: 1994
Date of revision:
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