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Environmental taxes, offshoring and welfare: The effects of environmental damage and pollution intensity

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  • Iida, Takeshi
  • Mukherjee, Arijit

Abstract

We analyze the effects of domestic environmental damage and pollution intensity on a monopolist final good producer’s incentive for offshoring a critical intermediate good. Contrary to the usual pollution haven hypothesis, we find that a higher domestic environmental damage, which creates a higher domestic environmental tax, may decrease the incentive for offshoring. This trend is enhanced by a higher pollution intensity of the final good production. Hence, a lower pollution intensity of the final good production may increase offshoring and pollution leakage. Offshoring in our analysis can be excessive or insufficient from the point of view of the domestic country.

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  • Iida, Takeshi & Mukherjee, Arijit, 2025. "Environmental taxes, offshoring and welfare: The effects of environmental damage and pollution intensity," Journal of Environmental Economics and Management, Elsevier, vol. 130(C).
  • Handle: RePEc:eee:jeeman:v:130:y:2025:i:c:s0095069624001499
    DOI: 10.1016/j.jeem.2024.103075
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    More about this item

    Keywords

    Environmental policy; Offshoring; Pollution haven; Pollution intensity; Tax;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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