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Shadow prices, environmental stringency, and international competitiveness

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  • van Soest, Daan P.
  • List, John A.
  • Jeppesen, Tim

Abstract

Empirical tests of the relationship between international competitiveness and the severity of environmental regulations are hampered by the lack of pollution abatement cost data for non-U.S. countries. The theory of the firm suggests that environmental stringency can be measured by the difference between a polluting input's shadow price and its market price. We make a first attempt at quantifying such a measure for two industries located in nine European OECD countries. Overall, we provide (i) a new approach to measure cross-country regulatory differences in that we use a theoretically attractive measure of industry-specific private compliance cost, and (ii) empirical estimates that are an attractive tool for researchers and policymakers who are interested in examining how economic activity is influenced by compliance costs.
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(This abstract was borrowed from another version of this item.)

Suggested Citation

  • van Soest, Daan P. & List, John A. & Jeppesen, Tim, 2006. "Shadow prices, environmental stringency, and international competitiveness," European Economic Review, Elsevier, vol. 50(5), pages 1151-1167, July.
    • Handle: RePEc:eee:eecrev:v:50:y:2006:i:5:p:1151-1167
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