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Developing Country Second-Mover Advantage in Competition Over Environmental Standards and Taxes

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  • VALESKA GROENERT
  • BEN ZISSIMOS

Abstract

We show that, in competition between a developed country and a developing country over environmental standards and taxes, the developing country may have a 'second- mover advantage.' In our model, firms do not unanimously prefer lower environmental- standard levels. We introduce this feature to an otherwise familiar model of fiscal competi- tion. Four distinct outcomes can be characterized by varying the marginal cost to firms of an environmental externality: (1) the outcome may be efficient; (2) the developing country may be a 'pollution haven;' a place to escape excessively high environmental standards in the developed country; (3) the developing country may 'undercut' the developed country and attract all firms; (4) the developed country may be a pollution haven.
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Suggested Citation

  • Valeska Groenert & Ben Zissimos, 2013. "Developing Country Second-Mover Advantage in Competition Over Environmental Standards and Taxes," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 15(5), pages 700-728, October.
  • Handle: RePEc:bla:jpbect:v:15:y:2013:i:5:p:700-728
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    File URL: http://hdl.handle.net/10.1111/jpet.2013.15.issue-5
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation

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