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Environmental policy uncertainty, policy coordination and relocation decisions

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  • T. VERBEKE

    ()

  • M. DE CLERCQ

    ()

Abstract

We analyse the relocation decision of a firm who is producing in one country (home country) but has the opportunity to relocate. The firm is faced with uncertain environmental policy formation both at home as well as in the foreign country. We allow for international environmental policy coordination and for environmental policy risks to be correlated with economy-wide risk. We show that the impact of uncertainty on the relocation decision depends on the absolute level of uncertainty. However, this relationship is substantially affected by the existence of policy coordination and the correlation between environmental policy uncertainty and economy-wide risks. In the case of coordinated environmental policies for instance, an Ushaped relation between uncertainty and relocation emerges.

Suggested Citation

  • T. Verbeke & M. De Clercq, 2003. "Environmental policy uncertainty, policy coordination and relocation decisions," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 03/208, Ghent University, Faculty of Economics and Business Administration.
  • Handle: RePEc:rug:rugwps:03/208
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    File URL: http://wps-feb.ugent.be/Papers/wp_03_208.pdf
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    References listed on IDEAS

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    Cited by:

    1. Jan Ženka & Vladislav Čadil, 2009. "Regional distribution of technology-intensive manufacturing industries in the czech republic with an accent on risk of delocalisation," Prague Economic Papers, Prague University of Economics and Business, vol. 2009(1), pages 61-77.
    2. Jan Ženka, 2009. "Delokalizace zpracovatelského průmyslu ČR (komponentní analýza) [Delocalization of czech manufacturing: which branches of manufacturing are threatened by relocation abroad?]," Politická ekonomie, Prague University of Economics and Business, vol. 2009(1), pages 79-93.

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    More about this item

    Keywords

    Location decision; policy uncertainty; environmental policy coordination; option;
    All these keywords.

    JEL classification:

    • F18 - International Economics - - Trade - - - Trade and Environment
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory

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