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Bontems, Philippe
, Cheikbossian, Guillaume and Hafidi, Houda
(2024)
Environmental Tax Competition and Welfare: The Good News about Lobbies.
TSE Working Paper, n. 24-1551, Toulouse
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Abstract
This paper focuses on the welfare effects of domestic and international lobbying in the context of two countries linked by both trade and pollution. We consider a reciprocal-markets model where, in each country, a domestic firm produces a polluting good, that can result in a cross-national environmental externality, and competes in quantities in each market with a foreign firm. Each government independently sets a pollution tax under political pressure from green and industrial lobbies `a la Grossman and Helpman (1994). Our results mainly show that political pressure from domestic and/or international lobbies can help mitigate tax competition between the two countries, resulting in an improvement in social welfare. In fact, lobbying acts much like a strategic delegation device by changing the social welfare weights in the objective function of each government. The (potential) welfare-improving effect of political pressure depends on the relative strengths of the lobbies and on the nature of the strategic interactions in taxes.
| Item Type: | Monograph (Working Paper) |
|---|---|
| Language: | English |
| Date: | July 2024 |
| Place of Publication: | Toulouse |
| Uncontrolled Keywords: | Lobbying, transboundary pollution, international trade, international politics, environmental tax |
| JEL Classification: | D72 - Economic Models of Political Processes - Rent-Seeking, Elections, Legislatures, and Voting Behavior F12 - Models of Trade with Imperfect Competition and Scale Economies F18 - Trade and Environment Q58 - Government Policy |
| Subjects: | B- ECONOMIE ET FINANCE |
| Divisions: | TSE-R (Toulouse) |
| Institution: | Université Toulouse Capitole |
| Site: | UT1 |
| Date Deposited: | 12 Jul 2024 11:20 |
| Last Modified: | 07 Nov 2024 10:14 |
| OAI Identifier: | oai:tse-fr.eu:129516 |
| URI: | https://publications.ut-capitole.fr/id/eprint/49543 |
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