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Do International Environmental Agreements Affect Tax and Environmental Competition among Asymmetric Countries?

Author

Listed:
  • Thierry Madiès

    (Université de Fribourg, Switzerland.)

  • Ornella Tarola

    (DISSE, Rome, Italy)

  • Emmanuelle Taugourdeau

    (CNRS, CREST, Palaiseau, France)

Abstract

Developed and developing countries compete using various instruments including corporate taxes and environmental regulations in order to attract firms. They also commit to international environmental agreements with “common but differentiated responsibilities” (CBDR). We investigate how the principles of CBDR and of “in a position to do so” embedded in global environmental agreements affect optimal corporate taxes and environmental standards. We find that the latter depend only on the mitigation burdens imposed by international agreements. In other words, the burden of competition between countries is carried by corporate taxes, which depend among others on the level of firms’ mobility costs and on production cost differentials. Interestingly, we find that developed countries are not necessarily worse-off in terms of payoffs under CBDR, while emerging countries “in a position to do so” are not necessarily harmed by assuming responsibilities.

Suggested Citation

  • Thierry Madiès & Ornella Tarola & Emmanuelle Taugourdeau, 2022. "Do International Environmental Agreements Affect Tax and Environmental Competition among Asymmetric Countries?," Working Papers 2022-21, Center for Research in Economics and Statistics.
  • Handle: RePEc:crs:wpaper:2022-21
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    References listed on IDEAS

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    More about this item

    Keywords

    Tax Competition; Capital Integration; Global Pollution; Environmental agreements.;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location
    • R5 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

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