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Excess Burden of Taxation and Environmental Policy Mix with a Consumer‐Friendly Firm

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  • Mariel Leal
  • Arturo Garcia
  • Sang‐Ho Lee

Abstract

This study examines the environmental policy mix of tradable emission permits and emission taxes in a duopoly model with a consumer‐friendly firm. We analyse the interplay of the two policies and the welfare consequences in the presence of excess burden of taxation. We show that an emission tax can be redundant when both the excess burden of taxation and the degree of consumer friendliness are insignificant. However, when the excess burden of taxation is significant, tradable permits policy with tax treatment should be applied to enhance welfare in the presence of a consumer‐friendly firm. Finally, under the tax revenue‐neutral case where the excess burden of taxation does not matter, the environmental policy mix is also efficient if the degree of consumer friendliness is sufficiently high.

Suggested Citation

  • Mariel Leal & Arturo Garcia & Sang‐Ho Lee, 2019. "Excess Burden of Taxation and Environmental Policy Mix with a Consumer‐Friendly Firm," The Japanese Economic Review, Japanese Economic Association, vol. 70(4), pages 517-536, December.
    • Handle: RePEc:bla:jecrev:v:70:y:2019:i:4:p:517-536
    DOI: 10.1111/jere.12221
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    Cited by:

    1. Bárcena-Ruiz, Juan Carlos & Sagasta, Amagoia, 2022. "International trade and environmental corporate social responsibility," Energy Economics, Elsevier, vol. 115(C).
    2. Pu‐yan Nie & Yong‐cong Yang, 2020. "Cost‐reduction innovation under mixed economy," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(7), pages 1195-1201, October.
    3. Arturo Garcia & Mariel Leal & Sang-Ho Lee, 2021. "Competitive CSR in a strategic managerial delegation game with a multiproduct corporation," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 68(3), pages 301-330, September.
    4. Bárcena-Ruiz, Juan Carlos & Sagasta, Amagoia, 2021. "Environmental policies with consumer-friendly firms and cross-ownership," Economic Modelling, Elsevier, vol. 103(C).
    5. Feng Pian & Lili Xu & Yuyan Chen & Sang-Ho Lee, 2020. "Global Emission Taxes and Port Privatization Policies under International Competition," Sustainability, MDPI, vol. 12(16), pages 1-25, August.
    6. Leal, Mariel & Garcia, Arturo & Lee, Sang-Ho, 2020. "Strategic CSR and merger in multiproduct mixed markets with state-holding corporation," MPRA Paper 102351, University Library of Munich, Germany, revised 10 Aug 2020.
    7. Mariel Leal & Arturo García & Sang-Ho Lee, 2021. "Sequencing R&D decisions with a consumer-friendly firm and spillovers," The Japanese Economic Review, Springer, vol. 72(2), pages 243-260, April.
    8. Juan Carlos Bárcena‐Ruiz & Amagoia Sagasta, 2021. "Cross‐ownership and corporate social responsibility," Manchester School, University of Manchester, vol. 89(4), pages 367-384, July.
    9. Leal, Mariel & García, Arturo & Lee, Sang-Ho, 2021. "Strategic CSR and merger decisions in multiproduct mixed markets with state-holding corporation," International Review of Economics & Finance, Elsevier, vol. 72(C), pages 319-333.
    10. Arturo García & Mariel Leal & Sang‐Ho Lee, 2020. "Welfare‐improving cooperation with a consumer‐friendly multiproduct corporation," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(7), pages 1144-1155, October.
    11. Hirose, Kosuke & Ishihara, Akifumi & Matsumura, Toshihiro, 2024. "Tax versus regulations: Polluters’ incentives for loosening industry emission targets," Energy Economics, Elsevier, vol. 136(C).
    12. Jiaqi Chen & Doori Kim & Sang‐Ho Lee, 2024. "Endogenous timing of R&D decisions with spillovers: Output versus research subsidies," Bulletin of Economic Research, Wiley Blackwell, vol. 76(3), pages 631-649, July.

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    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

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