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How Effective are Emissions Taxes in an Open Economy?

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  • Jota Ishikawa
  • Tomohiro Kuroda

Abstract

This paper compares emissions taxes with other taxes from the viewpoint of emissions reduction in an open economy. Using a simple monopoly model, we show that emissions taxes may not be very effective to protect the environment because of the spillover effects between markets stemming from non-constant marginal costs and transboundary externalities. Other taxes such as production taxes and tariffs are more effective under certain conditions. Thus, an easy application of emissions taxes should be discreet in the open economy framework. Copyright © 2007 The Authors; Journal compilation © 2007 Blackwell Publishing Ltd.

Suggested Citation

  • Jota Ishikawa & Tomohiro Kuroda, 2007. "How Effective are Emissions Taxes in an Open Economy?," Review of Development Economics, Wiley Blackwell, vol. 11(2), pages 359-368, May.
  • Handle: RePEc:bla:rdevec:v:11:y:2007:i:2:p:359-368
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    1. Ishikawa, Jota, 2000. "Foreign Monopoly and Trade Policy under Segmented and Integrated Markets," Economic Review, Hitotsubashi University, vol. 51(4), pages 321-336, January.
    2. Markusen James R. & Morey Edward R. & Olewiler Nancy D., 1993. "Environmental Policy when Market Structure and Plant Locations Are Endogenous," Journal of Environmental Economics and Management, Elsevier, vol. 24(1), pages 69-86, January.
    3. Nahata, Babu & Ostaszewski, Krzysztof & Sahoo, P K, 1990. "Direction of Price Changes in Third-Degree Price Discrimination," American Economic Review, American Economic Association, vol. 80(5), pages 1254-1258, December.
    4. Norman J. Ireland, 1984. "Dual Equilibria and Discontinuous Response in Monopolistic Competition with Two Classes of Consumers," RAND Journal of Economics, The RAND Corporation, vol. 15(3), pages 377-384, Autumn.
    5. Markusen, James R. & Morey, Edward R. & Olewiler, Nancy, 1995. "Competition in regional environmental policies when plant locations are endogenous," Journal of Public Economics, Elsevier, vol. 56(1), pages 55-77, January.
    6. Michael Rauscher, 1995. "Environmental regulation and the location of polluting industries," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 2(2), pages 229-244, August.
    7. Formby, John P & Layson, Stephen & Smith, W James, 1982. "The Law of Demand, Positive Sloping Marginal Revenue, and Multiple Profit Equilibria," Economic Inquiry, Western Economic Association International, vol. 20(2), pages 303-311, April.
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    Cited by:

    1. Kenji Fujiwara, 2014. "Tax Principles and Coordination of Trade and Domestic Policies Under Imperfect Competition," Australian Economic Papers, Wiley Blackwell, vol. 53(1-2), pages 29-40, June.
    2. Kenji Fujiwara, 2013. "A Win–Win–Win Tariff–Tax Reform under Imperfect Competition," Review of International Economics, Wiley Blackwell, vol. 21(5), pages 857-867, November.
    3. Fujiwara, Kenji, 2014. "Pareto-improving tariff-tax reforms under imperfect competition," International Review of Economics & Finance, Elsevier, vol. 31(C), pages 12-20.
    4. Kenji Fujiwara & Ryoma Kitamura, 2014. "A trade and domestic tax reform in imperfectly competitive markets," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 23(6), pages 785-795, September.
    5. Jinji, Naoto & Mizoguchi, Yoshihiro, 2016. "Rules of origin and technology spillovers from foreign direct investment under international duopoly," Japan and the World Economy, Elsevier, vol. 40(C), pages 47-60.
    6. Kieun Shim & Kyonghwa Jeong, 2016. "Revenue-enhancing Trade Liberalization in a Differentiated Duopoly," Review of Development Economics, Wiley Blackwell, vol. 20(2), pages 561-573, May.

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