IDEAS home Printed from https://ideas.repec.org/p/ucy/cypeua/02-2023.html

Can small economies act strategically? The case of consumption pollution and non-tradable goods

Author

Listed:
  • Michael S. Michael
  • Panos Hatzipanayotou
  • Nikos Tsakiris

Abstract

We develop a model of two small open asymmetric economies with two tradable and one non-tradable goods, capital mobility and consumption generated cross border pollution. We show that the Nash equilibrium calls for a consumption tax and capital tax (subsidy) when the consumption of the tradable (non-tradable) good pollutes. In this model, the consumption tax causes pollution leakages between the two countries which is partly offset by the capital tax or subsidy. Thus, the existence of non-tradable goods and international capital mobility induce the small countries to act strategically. In the absence of capital taxes, consumption taxes are lower to their rates when capital taxes are also present since are used strategically to mitigate the pollution leakage.

Suggested Citation

  • Michael S. Michael & Panos Hatzipanayotou & Nikos Tsakiris, 2023. "Can small economies act strategically? The case of consumption pollution and non-tradable goods," University of Cyprus Working Papers in Economics 02-2023, University of Cyprus Department of Economics.
    • Handle: RePEc:ucy:cypeua:02-2023
    as

    Download full text from publisher

    File URL: https://papers.econ.ucy.ac.cy/RePEc/papers/02-2023.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F18 - International Economics - - Trade - - - Trade and Environment
    • F20 - International Economics - - International Factor Movements and International Business - - - General
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ucy:cypeua:02-2023. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://www.ucy.ac.cy/econ/?lang=en .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.