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Strategic Environmental Policies under International Duopolistic Competition

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  • Georges Tanguay

Abstract

This paper examines the welfare implications of trade liberalization when governments behave strategically using pollution taxes and tariffs on imports. This competition leads to inefficiencies as each government seeks foreign rent and tries to transfer pollution to the other country. It is shown that banning tariffs leads to a higher level of pollution which decreases total welfare compared to the one obtained under restricted trade. As the rate of transboundary pollution transmission rises, the pollution-shifting motive is reduced and this leads to a too high pollution level. This problem is amplified when tariffs aren't available to governments. Copyright Kluwer Academic Publishers 2001

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  • Georges Tanguay, 2001. "Strategic Environmental Policies under International Duopolistic Competition," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 8(5), pages 793-811, November.
    • Handle: RePEc:kap:itaxpf:v:8:y:2001:i:5:p:793-811
    DOI: 10.1023/A:1012899411982
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    Cited by:

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    2. Jota Ishikawa & Toshihiro Okubo, 2010. "Environmental Standards under International Oligopoly," Global COE Hi-Stat Discussion Paper Series gd10-141, Institute of Economic Research, Hitotsubashi University.
    3. Bo Li & Fei Xing & Mark Yu, 2018. "Upstream Pricing Schemes, Trade Liberalization, Trade and Environmental Policies of Downstream Countries," Sustainability, MDPI, vol. 10(7), pages 1-13, July.
    4. Jinji, Naoto & 神事, 直人, 2005. "Strategic Environmental and Trade Policies with Corporate Environmentalism," Discussion Papers 2004-10, Graduate School of Economics, Hitotsubashi University.
    5. Cavagnac, Michel & Cheikbossian, Guillaume, 2012. "Coalition Formation and Environmental Policies in International Oligopoly Markets," TSE Working Papers 12-364, Toulouse School of Economics (TSE).
    6. Lai, Yu-Bong & Hu, Chia-Hsien, 2008. "Trade agreements, domestic environmental regulation, and transboundary pollution," Resource and Energy Economics, Elsevier, vol. 30(2), pages 209-228, May.
    7. Kenji Fujiwara, 2010. "Strategic Environmental Policies and the Gains from Trade Liberalization," Review of Development Economics, Wiley Blackwell, vol. 14(2), pages 360-373, May.
    8. Lai, Yu-Bong, 2024. "Policy linkages, country size, and international capital distribution," Journal of Environmental Economics and Management, Elsevier, vol. 123(C).
    9. Akihiko Yanase, 2010. "Trade, Strategic Environmental Policy, and Global Pollution," Review of International Economics, Wiley Blackwell, vol. 18(3), pages 493-512, August.
    10. Taiji Furusawa & Keisaku Higashida & Jota Ishikawa, 2004. "Tariffs versus quotas in the presence of imperfect competition and cross‐border externalities," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 37(2), pages 445-458, May.
    11. Kenji Fujiwara, 2011. "Market Integration and Competition in Environmental and Trade Policies," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 49(4), pages 561-572, August.
    12. Yu-Bong Lai & Chia-Hsien Hu, 2005. "Trade liberalization and transboundary pollution," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 7(1), pages 1-14, March.
    13. Qianqian Shao & Thorsten Janus & Maarten J. Punt & Justus Wesseler, 2018. "The Conservation Effects of Trade with Imperfect Competition and Biased Policymakers," Agriculture, MDPI, vol. 8(7), pages 1-22, July.
    14. Shoji Haruna & Rajeev K. Goel, 2023. "Transboundary Pollution Control with Both Production and Consumption Emissions," CESifo Working Paper Series 10667, CESifo.
    15. Onur A. Koska & Frank Stähler & Onur Yeni, 2020. "Trade and commodity taxes as environmental instruments in an open economy," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 48(2), pages 333-353, June.
    16. Celik, Sule & Orbay, Benan Zeki, 2011. "Location choice under trade and environmental policies," Economic Modelling, Elsevier, vol. 28(4), pages 1710-1715, July.
    17. Takeshi Iida & Kenji Takeuchi, 2011. "Does free trade promote environmental technology transfer?," Journal of Economics, Springer, vol. 104(2), pages 159-190, October.
    18. Yu-Bong Lai & Chia-Hsien Hu, 2005. "Trade liberalization and transboundary pollution," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 7(1), pages 1-14, March.
    19. Bontems, Philippe & Cheikbossian, Guillaume & Hafidi, Houda, 2024. "Environmental Tax Competition and Welfare: The Good News about Lobbies," TSE Working Papers 24-1551, Toulouse School of Economics (TSE).
    20. Odd Rune Straume, 2006. "Product Market Integration and Environmental Policy Coordination in An International Duopoly," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 34(4), pages 535-563, August.

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