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Environmental policies with excess burden of taxation in free-entry mixed markets

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  • Xu, Lili
  • Lee, Sang-Ho

Abstract

This study investigates environmental policies in free-entry mixed markets taking account of excess burden of taxation. We consider and compare the two ex-ante and ex-post tax policies in which the government chooses the optimal environmental tax before or after private firms invest fixed costs and enter the market, respectively. When the excess burden of taxation is small (large), we find that ex-post taxation imposes a lower (higher) tax level than ex-ante taxation, which induces a larger (smaller) number of firms and a higher (lower) environmental damage. We also show that the excess burden of taxation can increase the welfare, but ex-ante taxation always yields higher welfare than ex-post taxation. Finally, we show that privatization policy in a free-entry market decreases environmental damage but increases welfare only when the entry cost is low.

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  • Xu, Lili & Lee, Sang-Ho, 2018. "Environmental policies with excess burden of taxation in free-entry mixed markets," International Review of Economics & Finance, Elsevier, vol. 58(C), pages 1-13.
    • Handle: RePEc:eee:reveco:v:58:y:2018:i:c:p:1-13
    DOI: 10.1016/j.iref.2018.02.020
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    Citations

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    Cited by:

    1. Sumi Cho & Sang‐Ho Lee & Xoan T. Hoang, 2019. "Corporate social responsibility and strategic trade policy: An endogenous timing game and its policy implications," Australian Economic Papers, Wiley Blackwell, vol. 58(4), pages 480-497, December.
    2. Xu, Lili & Lee, Sang-Ho, 2021. "Port integration and competition under public and private ownership," MPRA Paper 106127, University Library of Munich, Germany.
    3. Qidi Zhang & Leonard F.S. Wang & Yapo Yang, 2020. "Indirect taxation with shadow cost of public funds in mixed oligopoly," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(3), pages 415-425, April.
    4. Xu, Lili & Lee, Sang-Ho, 2020. "Strategic Relations between Corporate Social Responsibility and Partial Privatization Policy with Foreign Penetration," MPRA Paper 100770, University Library of Munich, Germany.
    5. Xu, Lili & Fan, Xinying & Luan, Weixin, 2020. "Strategic corporate social responsibility of high-speed rail in China," China Economic Review, Elsevier, vol. 62(C).
    6. Xu, Lili & Chen, Yuyan & Lee, Sang-Ho, 2022. "Emission tax and strategic environmental corporate social responsibility in a Cournot–Bertrand comparison," Energy Economics, Elsevier, vol. 107(C).
    7. 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, Springer, vol. 70(4), pages 517-536, December.
    8. Bárcena-Ruiz, Juan Carlos & Sagasta, Amagoia, 2022. "International trade and environmental corporate social responsibility," Energy Economics, Elsevier, vol. 115(C).
    9. Jiaqi Chen & Sang‐Ho Lee & Timur K. Muminov, 2022. "R&D spillovers, output subsidies, and privatization in a mixed duopoly: Flexible versus irreversible R&D investments," Bulletin of Economic Research, Wiley Blackwell, vol. 74(3), pages 879-899, July.
    10. García, Arturo & Leal, Mariel & Lee, Sang-Ho, 2018. "Time-inconsistent environmental policies with a consumer-friendly firm: Tradable permits versus emission tax," International Review of Economics & Finance, Elsevier, vol. 58(C), pages 523-537.
    11. Seung-Leul Kim & Sang-Ho Lee & Toshihiro Matsumura, 2019. "Corporate social responsibility and privatization policy in a mixed oligopoly," Journal of Economics, Springer, vol. 128(1), pages 67-89, September.
    12. Lee, Sang-Ho & Muminov, Timur & Chen, Jiaqi, 2019. "Timing of R&D Decisions and Output Subsidies in a Mixed Duopoly with Spillovers," MPRA Paper 91452, University Library of Munich, Germany.
    13. Xu, Lili & Lee, Sang-Ho, 2021. "Strategic corporate social responsibility and tariff policies: The timing of commitments and policy implications," MPRA Paper 108499, University Library of Munich, Germany.
    14. Chen, Jiaqi & Lee, Sang-Ho, 2020. "Endogenous timing game with R&D decisions and output subsidies," MPRA Paper 99503, University Library of Munich, Germany.
    15. Xu, Lili & Lee, Sang-Ho, 2018. "Corporate Social Responsibility And Environmental Taxation With Endogenous Entry," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 59(2), pages 61-82, December.
    16. Chen, Jiaqi & Lee, Sang-ho & Muminov, Timur K., 2019. "Time-inconsistent Output Subsidy/Tax Policies in Free-entry Mixed Markets," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 60(1), pages 61-77, June.
    17. Sang‐Ho Lee & Timur K. Muminov, 2021. "R&D Information sharing in a mixed duopoly and incentive subsidy for research joint venture competition," Bulletin of Economic Research, Wiley Blackwell, vol. 73(2), pages 154-170, April.
    18. Chen, Ding & Wang, Leonard F.S. & Lee, Jen-yao, 2019. "Foreign ownership, privatization and subsidization with shadow cost of public funds," The North American Journal of Economics and Finance, Elsevier, vol. 50(C).
    19. Bárcena-Ruiz, Juan Carlos & Sagasta, Amagoia, 2021. "Environmental policies with consumer-friendly firms and cross-ownership," Economic Modelling, Elsevier, vol. 103(C).
    20. Lili Xu & Fanrui Su & Sang-Ho Lee, 2023. "Strategic corporate social responsibility and partial privatization policy with foreign penetration," The Japanese Economic Review, Springer, vol. 74(2), pages 251-278, April.

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    More about this item

    Keywords

    Environmental policy; Ex-ante taxation; Ex-post taxation; Free entry mixed market;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L32 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Enterprises; Public-Private Enterprises
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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