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Green Consumers, Emission Taxes, and Firm Relocation

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  • Birg, Laura
  • Voßwinkel, Jan

Abstract

This paper studies the interaction of environmental policy and green preferences under potential firm relocation. A green firm and a brown firm choose the environ- mental quality of their products. Both an emission tax and consumers'willingness to pay for green products encourage investment in environmental quality. Firms may relocate to avoid taxation or abstain from investment in environmental quality to produce at lower cost. If the green firm does not relocate, both the green firm and the brown firm provide higher quality levels. Compared to first-best taxation, the equilibrium emission tax is lower (higher) if only the brown (green) firm relocates.

Suggested Citation

  • Birg, Laura & Voßwinkel, Jan, 2020. "Green Consumers, Emission Taxes, and Firm Relocation," VfS Annual Conference 2020 (Virtual Conference): Gender Economics 224639, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc20:224639
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    References listed on IDEAS

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    1. Masako Ikefuji & Jun-ichi Itaya & Makoto Okamura, 2016. "Optimal Emission Tax with Endogenous Location Choice of Duopolistic Firms," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 65(2), pages 463-485, October.
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    More about this item

    Keywords

    environmental policy; emission tax; green consumers; relocation;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • F18 - International Economics - - Trade - - - Trade and Environment
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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