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Dynamic environmental taxes in an international duopoly

Author

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  • Shuichi Ohori

    (Institute of Economic Research, Kyoto University)

Abstract

This paper studies a dynamic game of environmental taxes between two countries in a Cournot duopoly. Based on the assumption of linear demand functions, we demonstrate that the environmental tax in the steady-state equilibrium is lower in a dynamic environmental tax game than in a static environmental one. Therefore, the dynamic behavior of the governments results in an increase in the environmental damage. Further, as a result of international cooperation on environmental taxes between two countries in the first period, there is an increase in the optimal environmental tax; this is due to the decrease in the effect of the rent-shifting.

Suggested Citation

  • Shuichi Ohori, 2007. "Dynamic environmental taxes in an international duopoly," KIER Working Papers 628, Kyoto University, Institute of Economic Research.
    • Handle: RePEc:kyo:wpaper:628
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    File URL: http://www.kier.kyoto-u.ac.jp/DP/DP628.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    environmental tax; dynamic programming; international duopoly;
    All these keywords.

    JEL classification:

    • F18 - International Economics - - Trade - - - Trade and Environment
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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