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Strategic Environmental Policy and International Trade in Asymmetric Oligopoly Markets

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  • Yann Duval

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  • Stephen Hamilton

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Abstract

This paper examines optimal cooperative and non-cooperative environmental taxes for the case in which a polluting input is used to produce an internationally-traded finished product. The model allows for terms-of-trade effects under oligopoly and employs a general specification of the environmental damage function that encompasses special cases of local, global, and transboundary externalities. The model has several implications for public finance. For example, inefficiently high environmental taxes may be optimal for a net exporting country in non-cooperative circumstances, as the motive to shift rent by selecting an inefficiently low tax rate is countervailed by the incentive to shift the burden of the tax to foreign consumers. The findings identify the important role of asymmetric trade flows (denominated in both goods and pollution exchange) in determining optimal cooperative and non-cooperative tax policy under oligopoly. Copyright Kluwer Academic Publishers 2002

Suggested Citation

  • Yann Duval & Stephen Hamilton, 2002. "Strategic Environmental Policy and International Trade in Asymmetric Oligopoly Markets," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 9(3), pages 259-271, May.
  • Handle: RePEc:kap:itaxpf:v:9:y:2002:i:3:p:259-271 DOI: 10.1023/A:1016268213772
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Juan Bárcena-Ruiz & María Garzón, 2014. "Multiproduct Firms and Environmental Policy Coordination," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 59(3), pages 407-431, November.
    2. Bhattacharya, Rabindra N. & Pal, Rupayan, 2010. "Environmental standards as strategic outcomes: A simple model," Resource and Energy Economics, Elsevier, vol. 32(3), pages 408-420, August.
    3. Yu-Bong Lai & Chia-Hsien Hu, 2005. "Trade liberalization and transboundary pollution," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 7(1), pages 1-14, March.
    4. Bárcena-Ruiz, Juan Carlos, 2012. "Privatization when the public firm is as efficient as private firms," Economic Modelling, Elsevier, vol. 29(4), pages 1019-1023.
    5. Bárcena-Ruiz, Juan Carlos & Campo, María Luz, 2012. "Partial cross-ownership and strategic environmental policy," Resource and Energy Economics, Elsevier, vol. 34(2), pages 198-210.
    6. Odd Rune Straume, 2006. "Product Market Integration and Environmental Policy Coordination in An International Duopoly," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 34(4), pages 535-563, August.
    7. Higashida, Keisaku & Jinji, Naoto, 2006. "Strategic use of recycled content standards under international duopoly," Journal of Environmental Economics and Management, Elsevier, vol. 51(2), pages 242-257, March.
    8. Tsung-Hsiu Tsai & Kuang-I Tu & Jiunn-Rong Chiou, 2015. "Tariffs and Environmental Taxes in the Presence of Environmental R&D," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 60(3), pages 413-431, March.
    9. Hamilton, Stephen F. & Requate, Till, 2004. "Vertical structure and strategic environmental trade policy," Journal of Environmental Economics and Management, Elsevier, vol. 47(2), pages 260-269, March.
    10. Cavagnac, Michel & Cheikbossian, Guillaume, 2012. "Coalition Formation and Environmental Policies in International Oligopoly Markets," TSE Working Papers 12-364, Toulouse School of Economics (TSE).
    11. repec:eee:resene:v:50:y:2017:i:c:p:36-50 is not listed on IDEAS
    12. Requate, Till, 2005. "Environmental Policy under Imperfect Competition: A Survey," Economics Working Papers 2005-12, Christian-Albrechts-University of Kiel, Department of Economics.
    13. Ouchida, Yasunori & Goto, Daisaku, 2014. "Do emission subsidies reduce emission? In the context of environmental R&D organization," Economic Modelling, Elsevier, vol. 36(C), pages 511-516.
    14. Lai, Yu-Bong & Hu, Chia-Hsien, 2008. "Trade agreements, domestic environmental regulation, and transboundary pollution," Resource and Energy Economics, Elsevier, vol. 30(2), pages 209-228, May.
    15. Joan Canton, 2007. "Environmental Taxation and International Eco-Industries," Working Papers 2007.26, Fondazione Eni Enrico Mattei.
    16. Lahiri, Sajal & Ono, Yoshiyasu, 2015. "Pollution, foreign direct investment, and welfare," Research in Economics, Elsevier, vol. 69(2), pages 238-247.
    17. Yann Duval, 2002. "Domestic Input Policies in Free Trade Areas with National Asymmetries," Eastern Economic Journal, Eastern Economic Association, vol. 28(2), pages 241-253, Spring.

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