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The Spillover Effects of Good Governance in a Tax Competition Framework with a Negative Environmental Externality

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  • Raymond G. Batina

    (Washington State University)

  • Gregmar I. Galinato

    (Washington State University)

Abstract

We investigate the impact of a political regime shift affecting consumers, business interests and lobby contributions when countries engage in tax competition in capital and a polluting resource. When consumers have more influence than resource owners, the resource tax rate and public spending rise while environmental damages, lobbying contribution, and the capital tax rate fall. This response can spillover to other countries leading to lower welfare. Capital tax harmonization improves welfare of consumers and resource owners. Resource tax harmonization and governance harmonization both reduce the influence of lobbying and improve consumer welfare but resource owners are worse off.

Suggested Citation

  • Raymond G. Batina & Gregmar I. Galinato, 2017. "The Spillover Effects of Good Governance in a Tax Competition Framework with a Negative Environmental Externality," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 67(4), pages 701-724, August.
    • Handle: RePEc:kap:enreec:v:67:y:2017:i:4:d:10.1007_s10640-015-9995-9
    DOI: 10.1007/s10640-015-9995-9
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    Cited by:

    1. Achim Hagen & Juan-Carlos Altamirano-Cabrera & Hans-Peter Weikard, 2021. "National political pressure groups and the stability of international environmental agreements," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 21(3), pages 405-425, September.
    2. Yu, Ping, 2020. "Carbon tax/subsidy policy choice and its effects in the presence of interest groups," Energy Policy, Elsevier, vol. 147(C).

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    More about this item

    Keywords

    Lobbying; Environmental damage; Tax competition; Spillovers;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption

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