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Discussion Paper Details

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Title: Environmental Regulation and the Location of Polluting Industries

Author(s): Michael Rauscher

Publication Date: November 1994

Keyword(s): Environmental Policy, Imperfect Competition and International Capital Movements

Programme Area(s): International Trade and Regional Economics

Abstract: Does international tax competition in the environmental field lead to undesirably low levels of environmental regulation and to unacceptable standards of environmental quality? The paper attempts to answer this question in a non-competitive partial-equilibrium framework. There is one firm that wishes to establish a plant in one of n countries. The paper shows that tax competition may lead to emission taxes that are either too low or too high. They may be so high that the investment is not undertaken although this would be optimal if the countries cooperated. On the other hand, taxes may be driven to zero if there are substantial transfrontier pollution effects.

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Bibliographic Reference

Rauscher, M. 1994. 'Environmental Regulation and the Location of Polluting Industries'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=1032