Optimal Emission Tax with Endogenous Location Choice of Duopolistic Firms

Ikefuji, Masako; Itaya, Jun‐ichi; Okamura, Makoto

doi:10.2139/ssrn.1557031

Cited by 101 publications

(16 citation statements)

References 14 publications

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“…Is Environmental Tax Harmonization Desirable in Global Value Chains? (Forslid et al 2017;Ikefuji et al 2016;Ishikawa and Okubo 2017;Pflüger 2001;Voßwinkel and Birg 2018;Zeng and Zhao 2009). 4 Pflüger (2001), for example, examines the effect of pollution taxes on the international relocation of monopolistically competitive firms.…”

Section: Related Studiesmentioning

confidence: 99%

Is Environmental Tax Harmonization Desirable in Global Value Chains?

Cheng

Kato

Obashi

2020

The B.E. Journal of Economic Analysis &Amp; Policy

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The spatial unbundling of parts production and assembly currently characterizes globalization, leading to the worldwide dispersion of pollution. We consider socially optimal (cooperative) environmental taxes in a two-country model of global value chains in which the location of both parts and assembly can differ. When unbundling costs are so high that parts and assembly must colocate in the pre-globalized world, pollution is spatially concentrated, and harmonizing environmental taxes maximizes global welfare. In contrast, with low unbundling costs triggering the dispersion of parts and thus pollution throughout the world as today, harmonization fails to maximize global welfare. Similar results hold when the two countries non-cooperatively choose their environmental taxes.

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Section: Related Studiesmentioning

confidence: 99%

Is Environmental Tax Harmonization Desirable in Global Value Chains?

Cheng

Kato

Obashi

2020

The B.E. Journal of Economic Analysis &Amp; Policy

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“…Finally, this work is also related to papers studying environmental regulation under the possibility of firms to relocate, such as Markusen et al (1993), Motta and Thisse (1994), Hoel (1997), Greaker (2003), Petrakis and Xepapadeas (2003) and Ikefuji et al (2016). Most papers consider a partial equilibrium approach and optimal environmental regulation.…”

Section: Relation To the Literaturementioning

confidence: 99%

North-South diffusion of climate-mitigation technologies: the crowding-out effect on relocation

Ing

Nicolaï

2020

Envir. Dev. Econ.

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The deployment of cleaner production technologies is supposed to be crucial to mitigate the effect of climate change. The diffusion of technology from developed to developing countries can be done through different channels. It can be a business decision such as firms' relocation, opening of a subsidiary or the adoption of technology by southern firms, or it may be decided at the government level. This paper investigates, in a two-country model (North and South), the relationship between the diffusion of mitigation technologies, firms' relocation and the environment. We assume that both countries implement a carbon tax and there are two kinds of production technology used: a relatively clean technology and a dirty one. This paper theoretically shows that the technology diffusion by technology adoption, public transfer or subsidiary creation induces a decrease in relocation, while technology diffusion via purchasing dirty southern firms may increase the number of relocated firms. The paper also demonstrates that technology diffusion may have perverse effects in the long run. Indeed, total emissions may increase with technology diffusion since southern firms become more competitive.

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“…Thus, the sign of the …rst derivative of rq i with respect to the relative precision of i's signal depends on the sign of (c i i ) : What does that mean? To display the intuition behind our …ndings, we subsequently consider the following two cases: 37 1. If c i < i , i.e., i's marginal cost turns out to be lower than expected, then @rq i @ i > 0.…”

Section: Information Sharing 51 Incentive To Share Informationmentioning

confidence: 99%

“…When the signal becomes more informative, and if the true value of the marginal cost is higher than its average (which signals that the …rm is environmentally friendly but productively ine¢ cient), …rm i must behave strategically and reduces its production under cost sharing agreements q S i . Hence, well informed, …rm i has more 37 A similar analysis can be undertaken with respect to j's relative precision of information. We can show that, the …rst derivative of rq i with respect to j yields:…”

Section: Conversely If C Imentioning

confidence: 99%

“…A large literature spanning the …eld of environmental economics has investigated emissions taxes under di¤erent informational structures (See for example, Christiansen and Smith, 2015;Elofsson, 2007; Espínola-Arredondo and Muñoz-García, 2015; Fikru and Gautier, 2016; Goulder and Parry, 2008;Heuson, 2010;Ikefuji et al, 2016;Mideksa and Weitzman, 2019;Pindyck, 2007;Pizer, 2002;Stavins, 1996Stavins, , 2020Weitzman, 1974;Zhao, 2003). 5 Here we set-up a model based on signaling games as in Elnaboulsi et al (2018).…”

Section: Introductionmentioning

confidence: 99%

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Environmental Taxation, Information Precision, and Information Sharing

2020

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We analyze how environmental taxes should be optimally levied when the regulators and …rms face costs uncertainties in a Stackelberg-Cournot game. We allow linearquadratic payo¤s functions coupled with an a¢ ne information structure encompassing common and private information with noisy signals. In the …rst period, the regulator chooses the intensity of emissions taxes in order to reduce externalities. In the second period, facing industry-related and …rm-speci…c shocks, …rms compete in the marketplace as Cournot rivals and choose outputs. We show that, given costs uncertainties with non-uniform quality of signals across …rms, the regulator sets di¤erentiated tax policy. We also examined the social value of information under ex-ante calibrated emissions taxes. We argue that the magnitude of the associated social bene…ts and costs of more precise private signals hinge largely and fundamentally on the value of the ratio of the slopes of the marginal damage and the marginal consumer surplus. The lack of accurate data clouds the regulatory process by preventing the necessary …ne-tuning of the tax rules towards speci…c environmental circumstances. Finally, we investigate information sharing between polluters and its impacts on welfare. We stress that, when there are threats of severe environmental damages under deep uncertainties, collusion is welfare reducing and may jeopardize the regulatory process. Numerical simulations illustrate the results that the model delivers.

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Optimal Emission Tax with Endogenous Location Choice of Duopolistic Firms

Cited by 101 publications

References 14 publications

Is Environmental Tax Harmonization Desirable in Global Value Chains?

Is Environmental Tax Harmonization Desirable in Global Value Chains?

North-South diffusion of climate-mitigation technologies: the crowding-out effect on relocation

Environmental Taxation, Information Precision, and Information Sharing

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