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Developing Country Second-Mover Advantage in Competition Over Standards and Taxes

Author

Listed:
  • Valeska Groenert

    () (Department of Economics, Vanderbilt University)

  • Myrna Wooders

    () (Department of Economics, Vanderbilt University)

  • Ben Zissimos

    () (Department of Economics, Vanderbilt University)

Abstract

We show that, in competition between a developed country and a developing country over environmental standards and taxes, the developing country may have a 'second-mover advantage.' In our model, firms do not unanimously prefer lower environmental-standard levels. We introduce this feature to an otherwise familiar model of fiscal competition. Three distinct outcomes can be characterized by varying the cost to firms of 'standard mismatch': (1) the outcome may be efficient; (2) the developing country may be a 'pollution haven,' where some firms escape excessively high environmental standards in the developed country; (3) environmental standards may be set excessively high.

Suggested Citation

  • Valeska Groenert & Myrna Wooders & Ben Zissimos, 2009. "Developing Country Second-Mover Advantage in Competition Over Standards and Taxes," Vanderbilt University Department of Economics Working Papers 0909, Vanderbilt University Department of Economics.
  • Handle: RePEc:van:wpaper:0909
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    File URL: http://www.accessecon.com/pubs/VUECON/vu09-w09.pdf
    File Function: First version, 2009
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    References listed on IDEAS

    as
    1. Zissimos, Ben & Wooders, Myrna, 2008. "Public good differentiation and the intensity of tax competition," Journal of Public Economics, Elsevier, vol. 92(5-6), pages 1105-1121, June.
    2. Levinson, Arik, 1997. "A Note on Environmental Federalism: Interpreting Some Contradictory Results," Journal of Environmental Economics and Management, Elsevier, vol. 33(3), pages 359-366, July.
    3. Markusen, James R. & Morey, Edward R. & Olewiler, Nancy, 1995. "Competition in regional environmental policies when plant locations are endogenous," Journal of Public Economics, Elsevier, vol. 56(1), pages 55-77, January.
    4. Levinson, Arik, 2003. "Environmental Regulatory Competition: A Status Report and Some New Evidence," National Tax Journal, National Tax Association;National Tax Journal, vol. 56(1), pages 91-106, March.
    5. Baldwin, Richard E. & Krugman, Paul, 2004. "Agglomeration, integration and tax harmonisation," European Economic Review, Elsevier, vol. 48(1), pages 1-23, February.
    6. Haufler, Andreas & Wooton, Ian, 1999. "Country size and tax competition for foreign direct investment," Journal of Public Economics, Elsevier, vol. 71(1), pages 121-139, January.
    7. Davies, Ronald B. & Ellis, Christopher J., 2007. "Competition in taxes and performance requirements for foreign direct investment," European Economic Review, Elsevier, vol. 51(6), pages 1423-1442, August.
    8. Justman, Moshe & Thisse, Jacques-Francois & van Ypersele, Tanguy, 2002. "Taking the bite out of fiscal competition," Journal of Urban Economics, Elsevier, vol. 52(2), pages 294-315, September.
    9. Zodrow, George R. & Mieszkowski, Peter, 1986. "Pigou, Tiebout, property taxation, and the underprovision of local public goods," Journal of Urban Economics, Elsevier, vol. 19(3), pages 356-370, May.
    10. Arik Levinson, 1999. "State Taxes and Interstate Hazardous Waste Shipments," American Economic Review, American Economic Association, vol. 89(3), pages 666-677, June.
    11. Levinson, Arik, 1999. "NIMBY taxes matter: the case of state hazardous waste disposal taxes," Journal of Public Economics, Elsevier, vol. 74(1), pages 31-51, October.
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    Cited by:

    1. Valeska Groenert & Ben Zissimos, 2013. "Developing Country Second-Mover Advantage in Competition Over Environmental Standards and Taxes," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 15(5), pages 700-728, October.

    More about this item

    Keywords

    Environmental standards; fiscal competition; second-mover advantage; tax competition;

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation

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