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To buy or to do it yourself? Pollution policy and environmental goods in developing countries

Author

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  • Roberta Sestini

    (Sapienza University of Rome)

  • Donatella Pugliese

    (Sapienza University of Rome)

Abstract

We analyse the effects of emissions taxes set by a developing country within a two-country model, with two asymmetric downstream firms and a foreign upstream eco-industry, and under the assumption that the more efficient firm may either obtain the environmental technology from the foreign innovator, or engage in abatement effort or finally do not abate at all. A tougher climate policy may become the key driver for inducing the more efficient firm to engage in production of the abatement technology, leading also to a fall in total emissions. The impact on aggregate welfare is not clear-cut and heavily depends on firms’ heterogeneity: only if the cost asymmetry is low enough the transition to the mixed equilibrium with one licensee and the other firm exerting abatement effort would make the society better off.

Suggested Citation

  • Roberta Sestini & Donatella Pugliese, 2021. "To buy or to do it yourself? Pollution policy and environmental goods in developing countries," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 48(1), pages 105-135, March.
    • Handle: RePEc:spr:epolin:v:48:y:2021:i:1:d:10.1007_s40812-020-00150-1
    DOI: 10.1007/s40812-020-00150-1
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    References listed on IDEAS

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    Cited by:

    1. Alessio D’Amato & Roberta Sestini, 2023. "Buying or performing abatement: environmental policy and welfare when commitment is (not) credible," SEEDS Working Papers 0423, SEEDS, Sustainability Environmental Economics and Dynamics Studies, revised Nov 2023.

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    More about this item

    Keywords

    Trade and environment; Eco-industry; Environmental regulation; Emissions technologies;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • F18 - International Economics - - Trade - - - Trade and Environment
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • 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

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