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Tariffs and the Adoption of Clean Technology Under Asymmetric Information

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Abstract

This paper examines the effect of import tariffs on the decision of a foreign monopolist to adopt "clean" technology - technology that reduces the flow of a negative cross-border externality per unit of exports. The clean technology is assumed to increase the marginal cost of production relative to the dirty technology, but only the firm knows the extent of the increase. Under complete information, we show that, despite its protectionist motivation, the importing country's optimal tariff induces the firm to adopt the clean technology if and only if it is globally efficient to do so. Under incomplete information, this efficiency property is disrupted. If the optimal tariff is decreasing in the marginal cost, then it leads the firm to bias its choice in favor of dirty technology.

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  • Rodney Ludema & Taizo Takeno, 2006. "Tariffs and the Adoption of Clean Technology Under Asymmetric Information," Working Papers gueconwpa~06-06-09, Georgetown University, Department of Economics.
    • Handle: RePEc:geo:guwopa:gueconwpa~06-06-09
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    8. Engel, Stefanie, 2004. "Achieving environmental goals in a world of trade and hidden action: the role of trade policies and eco-labeling," Journal of Environmental Economics and Management, Elsevier, vol. 48(3), pages 1122-1145, November.
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    10. Taiji Furusawa & Keisaku Higashida & Jota Ishikawa, 2004. "Tariffs versus quotas in the presence of imperfect competition and cross-border externalities," Canadian Journal of Economics, Canadian Economics Association, vol. 37(2), pages 445-458, May.
    11. Regibeau Pierre M & Gallegos Alberto, 2004. "Managed Trade, Trade Liberalisation and Local Pollution," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 4(2), pages 1-26, November.
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    Cited by:

    1. Robert W. Staiger & Alan O. Sykes, 2011. "International Trade, National Treatment, and Domestic Regulation," The Journal of Legal Studies, University of Chicago Press, vol. 40(1), pages 149-203.
    2. Slim Ben Youssef, 2010. "Adoption of a cleaner technology by a monopoly under incomplete information," Economics Bulletin, AccessEcon, vol. 30(1), pages 734-743.
    3. Alberto Gallegos David, 2017. "Managed Trade and Environmental Policy under Imperfect Competition," Remef - Revista Mexicana de Economía y Finanzas Nueva Época REMEF (The Mexican Journal of Economics and Finance), Instituto Mexicano de Ejecutivos de Finanzas, IMEF, vol. 12(3), pages 29-44, Julio-Sep.
    4. Takeshi Iida & Kenji Takeuchi, 2010. "Policy-Induced Environmental Technology Transfer," Discussion Papers 1008, Graduate School of Economics, Kobe University.
    5. Ullah, Ayat & Arshad, Muhammad & Kächele, Harald & Zeb, Alam & Mahmood, Nasir & Müller, Klaus, 2020. "Socio-economic analysis of farmers facing asymmetric information in inputs markets: evidence from the rainfed zone of Pakistan," Technology in Society, Elsevier, vol. 63(C).
    6. Takeshi Iida & Kenji Takeuchi, 2011. "Does free trade promote environmental technology transfer?," Journal of Economics, Springer, vol. 104(2), pages 159-190, October.
    7. Robert W. Staiger & Alan O. Sykes, 2009. "International Trade and Domestic Regulation," NBER Working Papers 15541, National Bureau of Economic Research, Inc.
    8. Ahmed Waqar Qasim, 2023. "Firms and Technology Adoption: The Role of Political Institutions and Market Size (Article)," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 62(1), pages 61-85.

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    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F18 - International Economics - - Trade - - - Trade and Environment

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