How Does Environmental Regulation Shape Economic Development? A Tax Competition Model of China

Pedro Naso
Authors registered in the RePEc Author Service: Timothy Swanson

No 54-2017, CIES Research Paper series from Centre for International Environmental Studies, The Graduate Institute

Abstract: We propose a novel theoretical framework to study how environmental regulation shapes economic development in a developing country such as China. We develop a dynamic tax competition model in which local governments, located in development zones, use variation in taxes to attract workers to their jurisdictions. Their objective is to maximize tax revenue less local health costs that are proportional to local pollution. Our main result is that competition generates a reallocation of productive factors when national regulation is introduced. Local governments in more productive regions set greater production taxes than in other regions. This makes workers and output to shift from more to less developed regions of the country.

Keywords: Tax competition; Asymmetric tax competition; Environment and Development (search for similar items in EconPapers)
JEL-codes: H71 H72 O13 Q56 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2017-10-05
New Economics Papers: this item is included in nep-cna, nep-env, nep-pub, nep-tra and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://repec.graduateinstitute.ch/pdfs/ciesrp/CIES_RP_54.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gii:ciesrp:cies_rp_54

Access Statistics for this paper

More papers in CIES Research Paper series from Centre for International Environmental Studies, The Graduate Institute Contact information at EDIRC.
Bibliographic data for series maintained by Kristine Kjeldsen ( this e-mail address is bad, please contact ).