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Dirty versus Clean Firms’ Relocation under International Trade and Imperfect Competition

Author

Listed:
  • Julie Ing

    (University of Rennes, France)

  • Jean-Philippe Nicolai

    (ETH Zurich, Switzerland)

Abstract

This paper develops a simple partial equilibrium model with two countries (North and South) to fathom the effects of firms’ relocation in a context of international and imperfect competition. Two different production technologies are considered, a clean technology and a dirty one, and the effects of relocation according to the kind of technology used by the relocated firms are determined. Two heterogeneous firms in the North and only one dirty firm in the South are assumed and the four different possible scenarios are compared: neither firm relocates, the two northern firms relocate, the clean one relocates and the dirty one relocates. This paper demonstrates that the relocation of a dirty firm as compared to the relocation of a clean firm is worse for the environment, better for northern consumers, and better for the domestic profits. Moreover, the relocation of a dirty firm always increases global emissions, while the relocation of a clean firm may decrease global emissions.

Suggested Citation

  • Julie Ing & Jean-Philippe Nicolai, 2019. "Dirty versus Clean Firms’ Relocation under International Trade and Imperfect Competition," CER-ETH Economics working paper series 19/319, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  • Handle: RePEc:eth:wpswif:19-319
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    File URL: https://www.ethz.ch/content/dam/ethz/special-interest/mtec/cer-eth/cer-eth-dam/documents/working-papers/WP-19-319.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Relocation; Emissions tax; Trade of polluting goods; Dirty and clean production technologies; Imperfect competition;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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