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Environmental Policy with Endogenous Plant Locations

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  • Hoel, Michael

Abstract

In a game between the governments of two countries, each chooses its own environmental policy. The Nash equilibria of the game are generally not Pareto optimal. On the one hand, each country may want to attract industry, giving it an incentive to choose low environmental taxes or standards. On the other hand, if disutility from pollution is sufficiently high, each country might prefer that a firm locates only in other countries. This effect tends to make the environmental policy under noncooperation stricter than it would be with cooperation. Copyright 1997 by The editors of the Scandinavian Journal of Economics.

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  • Hoel, Michael, 1997. " Environmental Policy with Endogenous Plant Locations," Scandinavian Journal of Economics, Wiley Blackwell, vol. 99(2), pages 241-259, June.
  • Handle: RePEc:bla:scandj:v:99:y:1997:i:2:p:241-59
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