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Environmental regulation and the location of polluting industries

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  • Rauscher, Michael

Abstract

Does international tax competition in the environmental field lead to undesirably low levels of environmental regulation and to unacceptable disruptions of environmental quality? The paper tries to answer this question in a non-competitive partial-equilibrium framework. There is one firm that wishes to establish a plant in one of n countries. The paper shows that tax competition may lead to emission taxes that are either too low or too high. They may be so high that the investment is not undertaken although this would be optimal if the countries cooperated. On the other end of the spectrum, a scenario in which taxes are driven to zero becomes possible if there are substantial transfrontier pollution effects.

Suggested Citation

  • Rauscher, Michael, 1994. "Environmental regulation and the location of polluting industries," Kiel Working Papers 639, Kiel Institute for the World Economy (IfW).
  • Handle: RePEc:zbw:ifwkwp:639
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    File URL: https://www.econstor.eu/bitstream/10419/47193/1/257222294.pdf
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    References listed on IDEAS

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    1. Brander, James & Krugman, Paul, 1983. "A 'reciprocal dumping' model of international trade," Journal of International Economics, Elsevier, vol. 15(3-4), pages 313-321, November.
    2. Markusen James R. & Morey Edward R. & Olewiler Nancy D., 1993. "Environmental Policy when Market Structure and Plant Locations Are Endogenous," Journal of Environmental Economics and Management, Elsevier, vol. 24(1), pages 69-86, January.
    3. Lucas, Robert E.B. & Wheeler, David & Hettige, Hemamala, 1992. "Economic development, environmental regulation, and the international migration of toxic industrial pollution : 1960-88," Policy Research Working Paper Series 1062, The World Bank.
    4. Low, P., 1992. "International Trade and the Environment," World Bank - Discussion Papers 159, World Bank.
    5. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, March.
    6. James R. Markusen & Edward R. Morey & Nancy Olewiler, 1992. "Noncooperative Equilibria in Regional Environmental Policies When Plant Locations are Endogenous," NBER Working Papers 4051, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Markusen, James R., 1997. "Costly pollution abatement, competitiveness and plant location decisions," Resource and Energy Economics, Elsevier, vol. 19(4), pages 299-320, November.
    2. Ngo Van Long & Antoine Soubeyran, 2001. "Emission Taxes and Standards for an Asymmetric Oligopoly," CIRANO Working Papers 2001s-07, CIRANO.
    3. Ngo Van Long & Antoine Soubeyran, 1998. "Pollution, Pigouvian Taxes, and Asymmetric International Oligopoly," CIRANO Working Papers 98s-30, CIRANO.
    4. Tanguay, Georges A. & Marceau, Nicolas, 2001. "Centralized versus decentralized taxation of mobile polluting firms," Resource and Energy Economics, Elsevier, vol. 23(4), pages 327-341, October.

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