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Trade Liberalization and Environmental Taxation in Federal Systems

Author

Listed:
  • Per G. Fredriksson
  • Xenia Matschke

Abstract

The literature on trade liberalization and environment has not yet considered federal structures. In this paper, we show how the design of environmental policy in a federal system has implications for the effects of trade reform. Trade liberalization leads to a decline in pollution taxes, regardless of whether pollution taxes are set at the federal (centralized) or local (decentralized) level, and it increases social welfare. The effect under a decentralized system is smaller than if these taxes are set by the federal government, and pollution emissions therefore decline in this case. Moreover, majority bias interacts with trade liberalization if federal taxes are used.

Suggested Citation

  • Per G. Fredriksson & Xenia Matschke, 2016. "Trade Liberalization and Environmental Taxation in Federal Systems," Scandinavian Journal of Economics, Wiley Blackwell, vol. 118(1), pages 150-167, January.
    • Handle: RePEc:bla:scandj:v:118:y:2016:i:1:p:150-167
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    File URL: http://hdl.handle.net/10.1111/sjoe.12127
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    Cited by:

    1. Dong-Hyeon Kim & Shu-Chin Lin, 2022. "Trade Openness and Environmental Policy Stringency: Quantile Evidence," Sustainability, MDPI, vol. 14(6), pages 1-15, March.
    2. Olper, Alessandro, . "The political economy of trade-related regulatory policy: environment and global value chain," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), vol. 5(3).
    3. Per Fredriksson & Jim Wollscheid, 2015. "Legal Origins and Climate Change Policies in Former Colonies," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 62(2), pages 309-327, October.

    More about this item

    JEL classification:

    • F1 - International Economics - - Trade
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation

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