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Centralized versus decentralized taxation of mobile polluting firms

  • Tanguay, Georges A.
  • Marceau, Nicolas

We consider a world in which a mobile polluting firm must locate in one of two regions. The regions differ in two dimensions: their marginal cost of pollution and the production cost of the firm. It is shown that under incomplete information on regional marginal costs of pollution, fiscal competition may lead to the sub-optimal location of the firm. We also show that under incomplete information, a sub-optimal location is less likely under centralized than under decentralized taxation. Nous étudions un monde dans lequel une firme polluante mobile cherche à se localiser dans une de deux régions données. Les régions présentent des différences quant à leur coût marginal des émissions polluantes et quant à leur coût de production. Il est démontré que dans un contexte d'information incomplète sur les coûts marginaux de pollution des régions, la concurrence fiscale peut mener à une localisation non-optimale de la firme. Il est également démontré que la centralisation de la taxation réduit la probabilité d'une localisation non-optimale.

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Article provided by Elsevier in its journal Resource and Energy Economics.

Volume (Year): 23 (2001)
Issue (Month): 4 (October)
Pages: 327-341

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Handle: RePEc:eee:resene:v:23:y:2001:i:4:p:327-341
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505569

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