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Environmental Policies and Mergers’ Externalities

Author

Listed:
  • Rafael S. Espinosa Ramírez

    (Departamento de Economía, Universidad de Guadalajara, Guadalajara, México.)

  • M. Ozgur Kayalica

    (Departament of Management Engineering, Istanbul Technical University, Istanbul, Turkey.)

Abstract

A Cournot oligopolistic setting model of trade is characterized by local and foreign firms competing in the presence of pollution quota and tax. Local firms are foreign-owned (FDI) and repatriate their profits. First, we analyze the impact on welfare given by the merger of the local firms, as a response to external firms’ competition and pollution abatement costs. Second, when merger is welfare decreasing, we study the best response of the government in order to compensate this negative externality. Finally, we compare the pollution quota and tax in order to determine their efficiency as a policy instrument.

Suggested Citation

  • Rafael S. Espinosa Ramírez & M. Ozgur Kayalica, 2007. "Environmental Policies and Mergers’ Externalities," Economía Mexicana NUEVA ÉPOCA, CIDE, División de Economía, vol. 0(1), pages 47-74, January-J.
    • Handle: RePEc:emc:ecomex:v:16:y:2007:i:1:p:47-74
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    File URL: http://www.economiamexicana.cide.edu/num_anteriores/XVI-1/02_ESPINOSA_Y_KAYALICA.pdf
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    References listed on IDEAS

    as
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    3. Stephen W. Salant & Sheldon Switzer & Robert J. Reynolds, 1983. "Losses From Horizontal Merger: The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 98(2), pages 185-199.
    4. David R. Collie, 2003. "Mergers and Trade Policy under Oligopoly," Review of International Economics, Wiley Blackwell, vol. 11(1), pages 55-71, February.
    5. Yohe, Gary W., 1979. "The backward incidence of pollution control--some comparative statics in general equilibrium," Journal of Environmental Economics and Management, Elsevier, vol. 6(3), pages 187-198, September.
    6. Auquier, A A & Caves, R E, 1979. "Monopolistic Export Industries, Trade Taxes, and Optimal Competition Policy," Economic Journal, Royal Economic Society, vol. 89(355), pages 559-581, September.
    7. Dixit, Avinash, 1984. "International Trade Policy for Oligopolistic Industries," Economic Journal, Royal Economic Society, vol. 94(376a), pages 1-16, Supplemen.
    8. Goldin,Ian & Winters,L. Alan (ed.), 1995. "The Economics of Sustainable Development," Cambridge Books, Cambridge University Press, number 9780521469579, October.
    9. Tim Jeppesen & John A. List & Henk Folmer, 2002. "Environmental Regulations and New Plant Location Decisions: Evidence from a Meta‐Analysis," Journal of Regional Science, Wiley Blackwell, vol. 42(1), pages 19-49, February.
    10. M. Kayalica & Sajal Lahiri, 2005. "Strategic Environmental Policies in the Presence of Foreign Direct Investment," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 30(1), pages 1-21, January.
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    Cited by:

    1. Daniel Gonzalez Olivares & Rafael Salvador Espinosa Ramirez, 2018. "Inversion extranjera directa y fusiones domesticas en presencia de productos diferenciados: Un analisis de bienestar social y politica publica," EconoQuantum, Revista de Economia y Finanzas, Universidad de Guadalajara, Centro Universitario de Ciencias Economico Administrativas, Departamento de Metodos Cuantitativos y Maestria en Economia., vol. 15(1), pages 73-98, Enero-Jun.

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    More about this item

    Keywords

    environmental policies; mergers; emission permits;
    All these keywords.

    JEL classification:

    • F2 - International Economics - - International Factor Movements and International Business
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • N5 - Economic History - - Agriculture, Natural Resources, Environment and Extractive Industries

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