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Environmental Regulation and the Location of Polluting Industries

Author

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  • Rauscher, Michael

Abstract

Does international tax competition in the environmental field lead to undesirably low levels of environmental regulation and to unacceptable standards of environmental quality? The paper attempts to answer this question in a non-competitive partial-equilibrium framework. There is one firm that wishes to establish a plant in one of n countries. The paper shows that tax competition may lead to emission taxes that are either too low or too high. They may be so high that the investment is not undertaken although this would be optimal if the countries cooperated. On the other hand, taxes may be driven to zero if there are substantial transfrontier pollution effects.

Suggested Citation

  • Rauscher, Michael, 1994. "Environmental Regulation and the Location of Polluting Industries," CEPR Discussion Papers 1032, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:1032
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    More about this item

    Keywords

    Environmental Policy; Imperfect Competition; International Capital Movements;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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