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Environmental regulation, multinational companies and international competitiveness

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  • Ulph, Alistair
  • Valentini, Laura
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    Abstract

    Concerns have been expressed that in a global market place with mobile capital, national governments will have incentives to set weak environmental policies (“environmental dumpingâ€) to protect the international competitiveness of their domestic firms, that these incentives are particularly strong in industries where plants may be relatively footloose, so that governments are concerned to prevent “capital flightâ€, and that footloose plants are particularly associated with multinational firms. It is then often suggested that appropriate policy responses would be to seek to harmonise environmental regulations or impose minimum standards for environmental regulations. In this paper we set out these concerns in terms of a number of more precisely made claims and then review recent developments in economic analysis (including some of our own work) and empirical evidence to show that the claims cannot be generally sustained and that the suggested policies may be harmful. However, devising more appropriate policies is by no means straightforward. Keywords; plant location, environmental policy, eco-dumping, competition JEL Classification: F1, H4, L5, Q2

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    Bibliographic Info

    Paper provided by Economics Division, School of Social Sciences, University of Southampton in its series Discussion Paper Series In Economics And Econometrics with number 0037.

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    Date of creation: 01 Jan 2000
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    Handle: RePEc:stn:sotoec:0037

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    1. Feenstra, T.L., 1998. "Environmental Policy Instruments and International Rivalry: A Dynamic Analysis," Open Access publications from Tilburg University urn:nbn:nl:ui:12-76006, Tilburg University.
    2. Rauscher, Michael, 1997. "International Trade, Factor Movements, and the Environment," OUP Catalogue, Oxford University Press, number 9780198290506, September.
    3. James R. Markusen & Edward R. Morey & Nancy Olewiler, 1991. "Environmental Policy When Market Structure and Plant Locations are Endo-genous," NBER Working Papers 3671, National Bureau of Economic Research, Inc.
    4. Hoel, Michael, 1997. " Environmental Policy with Endogenous Plant Locations," Scandinavian Journal of Economics, Wiley Blackwell, vol. 99(2), pages 241-59, June.
    5. Ulph, A. & Valentini, L., 1997. "Plant location and strategic environmental policy with inter-sectoral linkages," Resource and Energy Economics, Elsevier, vol. 19(4), pages 363-383, November.
    6. James R. Markusen & Edward R. Morey & Nancy Olewiler, 1992. "Noncooperative Equilibria in Regional Environmental Policies When Plant Locations are Endogenous," NBER Working Papers 4051, National Bureau of Economic Research, Inc.
    7. Ulph, Alistair, 1998. "Political institutions and the design of environmental policy in a federal system with asymmetric information," European Economic Review, Elsevier, vol. 42(3-5), pages 583-592, May.
    8. 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.
    9. Johal, S. & Ulph, A., 1998. "Tying governments' hands: why harmonisation of environmental policies may be desirable," Discussion Paper Series In Economics And Econometrics 9802, Economics Division, School of Social Sciences, University of Southampton.
    10. Levinson, Arik, 1996. "Environmental regulations and manufacturers' location choices: Evidence from the Census of Manufactures," Journal of Public Economics, Elsevier, vol. 62(1-2), pages 5-29, October.
    11. Ulph, A., 1997. "Harmonisation, minimum standards and optimal international environmental policy under asymmetric information," Discussion Paper Series In Economics And Econometrics 9701, Economics Division, School of Social Sciences, University of Southampton.
    12. Motta, Massimo & Thisse, Jacques-Francois, 1994. "Does environmental dumping lead to delocation?," European Economic Review, Elsevier, vol. 38(3-4), pages 563-576, April.
    13. Virginia D. McConnell & Robert M. Schwab, 1990. "The Impact of Environmental Regulation on Industry Location Decisions: The Motor Vehicle Industry," Land Economics, University of Wisconsin Press, vol. 66(1), pages 67-81.
    14. Fredriksson, Per G., 1997. "The Political Economy of Pollution Taxes in a Small Open Economy," Journal of Environmental Economics and Management, Elsevier, vol. 33(1), pages 44-58, May.
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