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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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    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.
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    8. 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.
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    10. George R. Zodrow & Peter Mieszkowski, 2019. "Pigou, Tiebout, Property Taxation, and the Underprovision of Local Public Goods," World Scientific Book Chapters, in: George R Zodrow (ed.), TAXATION IN THEORY AND PRACTICE Selected Essays of George R. Zodrow, chapter 17, pages 525-542, World Scientific Publishing Co. Pte. Ltd..
    11. 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.
    12. Arik Levinson, 1999. "State Taxes and Interstate Hazardous Waste Shipments," American Economic Review, American Economic Association, vol. 89(3), pages 666-677, June.
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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.

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    More about this item

    Keywords

    Environmental standards; fiscal competition; second-mover advantage; tax competition;
    All these keywords.

    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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