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Developing Country Second-Mover Advantage in Competition over Environmental Standards and Taxes

  • Valeska Groenert

    ()

    (Universitat Aut�noma de Barcelona)

  • Myrna Wooders

    ()

    (Department of Economics, Vanderbilt University)

  • Ben Zissimos

    ()

    (Department of Economics, Vanderbilt University)

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 competi- tion. Four distinct outcomes can be characterized by varying the marginal cost to firms of an environmental externality: (1) the outcome may be efficient; (2) the developing country may be a 'pollution haven;' a place to escape excessively high environmental standards in the developed country; (3) the developing country may 'undercut' the developed country and attract all firms; (4) the developed country may be a pollution haven.

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File URL: http://www.accessecon.com/pubs/VUECON/vu10-w12R.pdf
File Function: Revised version, October 2010
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Paper provided by Vanderbilt University Department of Economics in its series Vanderbilt University Department of Economics Working Papers with number 1012.

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Date of creation: Oct 2010
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Handle: RePEc:van:wpaper:1012
Contact details of provider: Web page: http://www.vanderbilt.edu/econ/wparchive/index.html

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  1. Baldwin, Richard & Krugman, Paul, 2000. "Agglomeration, Integration and Tax Harmonization," CEPR Discussion Papers 2630, C.E.P.R. Discussion Papers.
  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. Robin Boadway & Katherine Cuff & Nicolas Marceau, 2003. "Agglomeration Effects and the Competition for Firms," Cahiers de recherche 0324, CIRPEE.
  4. 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.
  5. Arik Levinson, 1999. "State Taxes and Interstate Hazardous Waste Shipments," American Economic Review, American Economic Association, vol. 89(3), pages 666-677, June.
  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. Werner Antweiler & Brian R. Copeland & M. Scott Taylor, 2001. "Is Free Trade Good for the Environment?," American Economic Review, American Economic Association, vol. 91(4), pages 877-908, September.
  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.
  9. 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.
  10. Brueckner, Jan K., 2000. "A Tiebout/tax-competition model," Journal of Public Economics, Elsevier, vol. 77(2), pages 285-306, August.
  11. Arik Levinson, 2002. "Environmental Regulatory Competition: A Status Report and Some New Evident," Working Papers gueconwpa~02-02-07, Georgetown University, Department of Economics.
  12. 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.
  13. Josh Ederington & Arik Levinson & Jenny Minier, 2004. "Trade Liberalization and Pollution Havens," NBER Working Papers 10585, National Bureau of Economic Research, Inc.
  14. 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.
  15. Haufler, Andreas & Wooton, Ian, 1997. "Tax competition for foreign direct investment," Discussion Papers, Series II 329, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
  16. Black, Dan A & Hoyt, William H, 1989. "Bidding for Firms," American Economic Review, American Economic Association, vol. 79(5), pages 1249-56, December.
  17. 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.
  18. Valesca Groenert & Myrna Wooders & Ben Zissimos, 2008. "Competition over Standards and Taxes," Vanderbilt University Department of Economics Working Papers 0820, Vanderbilt University Department of Economics.
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