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Centralized versus Decentralized Taxation of Mobile Polluting Firms

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Abstract

We consider a world in which a mobile polluting firm must locate in one of two regions. The regions differ in two dimensions: their marginal cost of pollution and the production cost of the firm. It is shown that under incomplete information on regional marginal costs of pollution, fiscal competition may lead to the sub-optimal location of the firm. We also show that under incomplete information, a sub-optimal location is less likely under centralized than under decentralized taxation. Nous étudions un monde dans lequel une firme polluante mobile cherche à se localiser dans une de deux régions données. Les régions présentent des différences quant à leur coût marginal des émissions polluantes et quant à leur coût de production. Il est démontré que dans un contexte d'information incomplète sur les coûts marginaux de pollution des régions, la concurrence fiscale peut mener à une localisation non-optimale de la firme. Il est également démontré que la centralisation de la taxation réduit la probabilité d'une localisation non-optimale.

Suggested Citation

  • Georges A. Tanguay & Nicolas Marceau, 2000. "Centralized versus Decentralized Taxation of Mobile Polluting Firms," Cahiers de recherche CREFE / CREFE Working Papers 122, CREFE, Université du Québec à Montréal.
  • Handle: RePEc:cre:crefwp:122
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    Cited by:

    1. Jie He & Paul MAKDISSI & Quentin WODON, 2007. "Corruption, Inequality, and Environmental Regulation," Cahiers de recherche 07-13, Departement d'Economique de l'École de gestion à l'Université de Sherbrooke.
    2. Marceau, Nicolas, 2008. "La concurrence entre gouvernements est-elle bénéfique?," L'Actualité Economique, Société Canadienne de Science Economique, vol. 84(4), pages 365-390, Décembre.
    3. Georges A. Tanguay & Paul Lanoie & Jérôme Moreau, 2001. "Environmental Policy, Public Interest and Political Market," Cahiers de recherche 01-01, HEC Montréal, Institut d'économie appliquée.
    4. Paul Lanoie & Jérôme Moreau & Georges A. Tanguay, 2001. "Environmental Policy, Public Interest and Political Market," CIRANO Working Papers 2001s-37, CIRANO.
    5. Georges Tanguay, 2001. "Strategic Environmental Policies under International Duopolistic Competition," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 8(5), pages 793-811, November.

    More about this item

    Keywords

    Fiscal Competition; Location; Pollution;

    JEL classification:

    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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