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On the Pigouvian Tax Rule in an Open Economy: Opening the Gate to the Eco-industry

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  • Idrissa Sibailly

    (X-DEP-ECO - Département d'Économie de l'École Polytechnique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris, LEI - Laboratoire d'Economie Industrielle - Centre de Recherche en Économie et STatistique (CREST))

Abstract

This note investigates the impact of (international) technology transfer on optimal pollution taxation. To use a patented pollution abatement technology, the polluters subject to the emissions tax only pay fixed license fees to an (international) eco-industry (whose profits are shared among national and foreign suppliers). The second-best emissions tax is shown to decrease as the exogenous share of imported technology increases. When the domestic polluting industry is imperfectly competitive, this tax is always lower than the marginal damage. In contrast, when the polluting industry is perfectly competitive, the second-best emissions tax is lower than the marginal damage only in the case of incoming technology transfer. If the technology is transferred domestically, the second-best emissions tax is equal to the marginal damage. These results contrast with the literature on the impact of market power in the eco-industry on optimal policy design, initiated by David and Sinclair-Desgagné (2005).

Suggested Citation

  • Idrissa Sibailly, 2013. "On the Pigouvian Tax Rule in an Open Economy: Opening the Gate to the Eco-industry," Working Papers hal-00911464, HAL.
    • Handle: RePEc:hal:wpaper:hal-00911464
    Note: View the original document on HAL open archive server: https://hal.science/hal-00911464
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    References listed on IDEAS

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    Keywords

    Pigouvian Taxes; Eco-Industry; Technology Transfer; International Trade;
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