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Absentee Ownership of Immobile Factors and Environmental Policies in a Federation

  • Kangoh Lee

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    This paper studies the effects of absentee ownership of immobile factors on environmental policy of a jurisdiction in a federation. An increase in emissions in a jurisdiction increases factor incomes, but part of the increased factor incomes goes to absentee owners while only the residents of the jurisdiction bear the full disutility. In addition, the increase in emissions in a jurisdiction attracts capital and decreases capital in other jurisdictions, reducing the incomes that the residents of the jurisdiction earn from owning immobile factors in other jurisdictions. Absentee ownership thus reduces the marginal benefit of an increase in emissions while it leaves the marginal cost unaffected from the jurisdiction’s perspective. As a consequence, absentee ownership makes environmental policy of a jurisdiction too stringent relative to the efficient level. The paper also considers the effects of absentee ownership on environmental policy when goods trade is allowed. Copyright Springer 2005

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    File URL: http://hdl.handle.net/10.1007/s10640-005-6904-7
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    Article provided by European Association of Environmental and Resource Economists in its journal Environmental & Resource Economics.

    Volume (Year): 32 (2005)
    Issue (Month): 3 (November)
    Pages: 407-417

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    Handle: RePEc:kap:enreec:v:32:y:2005:i:3:p:407-417
    Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=100263

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    1. Huizinga, H.P. & Nielsen, S.B., 1995. "Capital income and profits taxation with foreign ownership of firms," Discussion Paper 1995-82, Tilburg University, Center for Economic Research.
    2. repec:ner:tilbur:urn:nbn:nl:ui:12-73857 is not listed on IDEAS
    3. Henk Folmer & Ignazio Musu, 1992. "Transboundary pollution problems, environmental policy and international cooperation: An introduction," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 2(2), pages 107-116, March.
    4. Sinn, Hans-Werner, . "The New Systems Competition: YRJÖ Jahnsson Lectures," Monographs in Economics, University of Munich, Department of Economics, number 19614.
    5. J. Bhagwati & R. Brecher, 1978. "National Welfare in an Open Economy in the Presence of Foreign Owned Factors of Production," Working papers 224, Massachusetts Institute of Technology (MIT), Department of Economics.
    6. Ghosh, Atish R., 1992. "Fiscal policy, the terms of trade, and the external balance," Journal of International Economics, Elsevier, vol. 33(1-2), pages 105-125, August.
    7. Hoel, M., 1996. "Coordination of Environmental Policy for Transboundary Environmental Problems," Memorandum 03/1996, Oslo University, Department of Economics.
    8. Schweinberger, Albert G & Vosgerau, Hans J, 1997. "Foreign Factor Ownership and Optimal Tariffs," Review of International Economics, Wiley Blackwell, vol. 5(1), pages 1-19, February.
    9. Oates, Wallace E. & Schwab, Robert M., 1988. "Economic competition among jurisdictions: efficiency enhancing or distortion inducing?," Journal of Public Economics, Elsevier, vol. 35(3), pages 333-354, April.
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