Strategic environmental policy and international trade in asymmetric oligopoly markets

    Authors

    Y. Duval;S. F. Hamilton

    Abbreviated Journal Title

    Int. Tax Public Financ.

    Keywords

    international trade; oligopoly; transboundary externality; SUBSIDIES; TAXES; Economics

    Abstract

    This paper examines optimal cooperative and non-cooperative environmental taxes for the case in which a polluting input is used to produce an internationally-traded finished product. The model allows for terms-of-trade effects under oligopoly and employs a general specification of the environmental damage function that encompasses special cases of local, global, and transboundary externalities. The model has several implications for public finance. For example, inefficiently high environmental taxes may be optimal for a net exporting country in noncooperative circumstances, as the motive to shift rent by selecting an inefficiently low tax rate is countervailed by the incentive to shift the burden of the tax to foreign consumers. The findings identify the important role of asymmetric trade flows (denominated in both goods and pollution exchange) in determining optimal cooperative and non-cooperative tax policy under oligopoly.

    Journal Title

    International Tax and Public Finance

    Volume

    9

    Issue/Number

    3

    Publication Date

    1-1-2002

    Document Type

    Article

    Language

    English

    First Page

    259

    Last Page

    271

    WOS Identifier

    WOS:000176802400003

    ISSN

    0927-5940

    Share

    COinS