Abstract
| Original language | English |
|---|---|
| Place of Publication | Tilburg |
| Publisher | TILEC |
| Volume | 2008-033 |
| Publication status | Published - 2008 |
Publication series
| Name | TILEC Discussion Paper |
|---|---|
| Volume | 2008-033 |
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Keywords
- Transboundary pollution
- Strategic trade
- Bilateral tariff reduction
- Pollution tax
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Transboundary Pollution, Trade Liberalization and Environmental Taxes. / Baksi, S.; Ray Chaudhuri, A.
Tilburg : TILEC, 2008. (TILEC Discussion Paper; Vol. 2008-033).Research output: Working paper › Discussion paper › Other research output
TY - UNPB
T1 - Transboundary Pollution, Trade Liberalization and Environmental Taxes
AU - Baksi, S.
AU - Ray Chaudhuri, A.
N1 - Subsequently published in AccessEcon 2009 (rt)
PY - 2008
Y1 - 2008
N2 - In a bilateral trade framework, we examine the impact of tariff reduction on the optimal pollution tax and social welfare when pollution is transboundary. Strategic considerations lead countries to distort their pollution tax in the non-cooperative equilibrium. Trade liberalization changes the distortion, and consequently the pollution tax and welfare, in ways that depend on the extent to which pollution is transboundary. We find that when the pollution damage parameter is sufficiently small (large), bilateral tariff reduction always decreases (increases) the pollution tax, irrespective of the value of the transboundary pollution parameter. However, when the pollution damage parameter takes intermediate values, bilateral tariff reduction decreases the pollution tax if and only if the transboundary pollution parameter is sufficiently large (or even sufficiently small, in certain cases). Moreover, with pollution being transboundary, the impact of trade liberalization on welfare is non-monotonic and concave. The greater the extent to which pollution crosses borders, the more likely is trade liberalization to reduce welfare.
AB - In a bilateral trade framework, we examine the impact of tariff reduction on the optimal pollution tax and social welfare when pollution is transboundary. Strategic considerations lead countries to distort their pollution tax in the non-cooperative equilibrium. Trade liberalization changes the distortion, and consequently the pollution tax and welfare, in ways that depend on the extent to which pollution is transboundary. We find that when the pollution damage parameter is sufficiently small (large), bilateral tariff reduction always decreases (increases) the pollution tax, irrespective of the value of the transboundary pollution parameter. However, when the pollution damage parameter takes intermediate values, bilateral tariff reduction decreases the pollution tax if and only if the transboundary pollution parameter is sufficiently large (or even sufficiently small, in certain cases). Moreover, with pollution being transboundary, the impact of trade liberalization on welfare is non-monotonic and concave. The greater the extent to which pollution crosses borders, the more likely is trade liberalization to reduce welfare.
KW - Transboundary pollution
KW - Strategic trade
KW - Bilateral tariff reduction
KW - Pollution tax
M3 - Discussion paper
VL - 2008-033
T3 - TILEC Discussion Paper
BT - Transboundary Pollution, Trade Liberalization and Environmental Taxes
PB - TILEC
CY - Tilburg
ER -