Ecological dumping under foreign investment quotas

Yasuyuki Sugiyama () and Muneyuki Saito ()
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Yasuyuki Sugiyama: Graduate School of Economics, Osaka University
Muneyuki Saito: Graduate School of Economics, Osaka University

No 08-31, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: In this paper, we examine the discrimination of emission taxes between the export and nontradable sectors in a small country. A few articles indicate that there should be no differentiation of environmental policies between sectors in a small country if the government uses indirect instruments as emission taxes. However, we show that the discrimination of emission taxes may occur in a small country that imposes foreign investment quotas. In particular, the possibility that ecological dumping occurs is higher if export goods are more labor intensive than import goods, as in developing countries. Moreover, in the case where imported goods are most capital intensive, both emission tax rates may be lower than marginal environmental damage, and ecological dumping may occur. It is also shown that easing foreign capital quotas may deteriorate the small country fs welfare.

Keywords: ecological dumping; emission tax; nontraded goods; international trade; capital movement (search for similar items in EconPapers)
JEL-codes: F18 F20 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2008-09
New Economics Papers: this item is included in nep-env
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Persistent link: https://EconPapers.repec.org/RePEc:osk:wpaper:0831

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