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Trade in Trash: A Political Economy Approach

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  • James H. Cassing
  • Ngo Van Long

Abstract

We study how the opportunity to trade in trash might influence the equilibrium outcome when the tax on the externality is determined by a political economy process. In our model, individuals have heterogeneous preferences for environmental quality, and there is a leakage when funds are transferred from the pressure groups to the politicians. When hard-core environmentalists and capitalists are organized interest groups while moderate environmentalists are not organized, we find that the politically chosen tax on the externality is below the optimal Pigouvian level. The opportunity to export waste in unlimited quantities, but at a price, is not the environmentalists' panacea and does not eliminate political social tension and suboptimal results. Nous étudions comment l'opportunité d'exporter des déchets pourrait influencer le résultat de l'équilibre lorsque la taxe sur l'externalité est déterminée par un processus d'économie politique. Dans notre modèle, les individus ont des préférences hétérogènes pour la qualité de l'environnement, et il y a une fuite lorsque les fonds sont transférés des groupes de pression aux politiciens. Lorsque les environnementalistes et les capitalistes purs et durs sont des groupes d'intérêts organisés alors que les environnementalistes modérés ne sont pas organisés, nous constatons que la taxe politiquement choisie sur l'externalité est inférieure au niveau pigouvien optimal. La possibilité d'exporter des déchets en quantités illimitées, mais à un prix, n'est pas la panacée des écologistes et n'élimine pas les tensions politiques sociales et les résultats sous-optimaux.

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  • James H. Cassing & Ngo Van Long, 2020. "Trade in Trash: A Political Economy Approach," CIRANO Working Papers 2020s-44, CIRANO.
  • Handle: RePEc:cir:cirwor:2020s-44
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    Cited by:

    1. Gründler, Klaus & Hillman, Arye L., 2021. "Ambiguous protection," European Journal of Political Economy, Elsevier, vol. 68(C).
    2. Klaus Gründler & Arye L. Hillman, 2021. "Ambiguous Protection," CESifo Working Paper Series 8888, CESifo.

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    More about this item

    Keywords

    Trade in Trash; Interest Groups; Externalities; Environmental Lobby; Political Economy; Trade and Environment; Commerce des déchets; Groupes d'intérêt; Externalité; Lobby environnemental; Économie politique; Commerce et environnement;
    All these keywords.

    JEL classification:

    • F18 - International Economics - - Trade - - - Trade and Environment
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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