Title

Strategic Environmental Policy and International Trade in Asymmetric Oligopoly Markets

Author Info

Yann Duval, Washington State University
Stephen F. Hamilton, University of Central FloridaFollow

Recommended Citation

Postprint version. Published in International Tax and Public Finance, Volume 9, Issue 3, May 1, 2002, pages 259-271.

NOTE: At the time of publication, the author Stephen Hamilton was not yet affiliated with Cal Poly.

The definitive version is available at https://doi.org/10.1023/A:1016268213772.

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 non-cooperative 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.

Disciplines

Economics

Copyright

2002 Springer Netherlands.