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Transboundary Pollution From Consumption In A Reciprocal Dumping Model

Author

Listed:
  • Kayalica M. Ozgur

    (Istanbul Technical University (Turkey))

  • Kayalica Olgay

    (Akbank, Sabanci Center, Istanbul)

Abstract

We analyse transboundary pollution externalities caused by consumption of goods. The model is of a reciprocal dumping type in which there are two countries and two firms. Each firm produces a homogeneous good to be consumed in both markets. There are two policies available to the governments of the two countries: consumption taxes and import tariffs. We characterise the Nash optimal levels of the instruments in the two countries. Our results suggest that the conditions satisfying higher consumption taxes in one country satisfy lower tariffs in that country. It is found that starting from non-cooperative solutions, an infinitesimal uniform reduction is unambiguously Pareto improving for each country and for the global welfare. This is because the gain from an increase in consumer surplus due to reform is larger than the loss in the tax revenues of the governments. Moreover, a revenue neutral reform which increases consumption taxes and reduce tariffs, is strictly Pareto improving.

Suggested Citation

  • Kayalica M. Ozgur & Kayalica Olgay, 2005. "Transboundary Pollution From Consumption In A Reciprocal Dumping Model," Global Economy Journal, De Gruyter, vol. 5(2), pages 1-16, June.
    • Handle: RePEc:bpj:glecon:v:5:y:2005:i:2:n:7
    DOI: 10.2202/1524-5861.1059
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    References listed on IDEAS

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    1. Stavros G. Memtsoudis & Melanie C. Besculides & Lambros Zellos & Namrata Patil & Selwyn O. Rogers, "undated". "Trends in Lung Surgery: United States 1988 to 2002," Mathematica Policy Research Reports 60c42912474f4d08b93f8b06c, Mathematica Policy Research.
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    Cited by:

    1. Michael S. Michael & Panos Hatzipanayotou, 2013. "Cooperative and Non-Cooperative Equilibrium Consumption Taxes in the Presence of Cross-Border Pollution," CESifo Working Paper Series 4501, CESifo.
    2. Michael S. Michael & Sajal Lahiri & Panos Hatzipanayotou, 2015. "Piecemeal Reform of Domestic Indirect Taxes toward Uniformity in the Presence of Pollution: with and without a Revenue Constraint," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 17(2), pages 174-195, April.
    3. Kenji Fujiwara, 2012. "Market integration, environmental policy, and transboundry pollution from consumption," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 21(4), pages 603-614, July.
    4. Michael S. Michael & Sajal Lahiri & Panos Hatzipanayotou, 2008. "Integrated Reforms of Indirect Taxes in the Presence of Pollution," CESifo Working Paper Series 2276, CESifo.
    5. Teodoro Gallucci & Vesselina Dimitrova & Georgi Marinov, 2019. "Interrelation between Eco-Innovation and Intra-Industry Trade—A Proposal for a Proxy Indicator of Sustainability in the EU Countries," Sustainability, MDPI, vol. 11(23), pages 1-13, November.
    6. Li, Zhigang & Yuan, Jia & Song, Frank & Wei, Shangjin, 2014. "Is economic rebalancing toward consumption “greener”? Evidence from visibility in China, 1984–2006," Journal of Comparative Economics, Elsevier, vol. 42(4), pages 1021-1032.
    7. Shoji Haruna & Rajeev K. Goel, 2023. "Transboundary Pollution Control with Both Production and Consumption Emissions," CESifo Working Paper Series 10667, CESifo.

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