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Article
Strategic Environmental Policy and International Trade in Asymmetric Oligopoly Markets
International Tax and Public Finance
  • Yann Duval, Washington State University
  • Stephen F. Hamilton, University of Central Florida
Publication Date
5-1-2002
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.
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Citation Information
Yann Duval and Stephen F. Hamilton. "Strategic Environmental Policy and International Trade in Asymmetric Oligopoly Markets" International Tax and Public Finance Vol. 9 Iss. 3 (2002) p. 259 - 271
Available at: http://works.bepress.com/shamilto/10/