Environmental policy and firm selection in the open economy

Udo Kreickemeier and Philipp Richter ()

No 04/19, CEPIE Working Papers from Technische Universität Dresden, Center of Public and International Economics (CEPIE)

Abstract: In this paper, we analyse the effects of a unilateral change in an emissions tax in a model of international trade with heterogeneous firms. We find a positive effect of tighter environmental policy on average productivity in the reforming country through reallocation of labour towards exporting firms. Domestic aggregate emissions fall, due to both a scale and a technique effect, but we show that the reduction in emissions following the tax increase is smaller than in autarky. Moreover, general equilibrium effects through changes in the foreign wage rate lead to a reduction in foreign emissions and, hence, to negative emissions leakage in case of transboundary pollution.

Keywords: Strategic Environmental Policy; Firm Location; Carbon Leakage; General Equilibrium; Trade and environment; Heterogeneous firms; Unilateral environmental policy; Emissions leakage (search for similar items in EconPapers)
JEL-codes: F12 F15 F18 Q58 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-ene, nep-env, nep-int and nep-res
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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https://www.econstor.eu/bitstream/10419/200195/1/1669055426.pdf (application/pdf)

Related works:
Journal Article: Environmental Policy and Firm Selection in the Open Economy (2021)
Working Paper: Environmental Policy and Firm Selection in the Open Economy (2019)
Working Paper: Environmental Policy and Firm Selection in the Open Economy (2019)
Working Paper: Environmental policy and firm selection in the open economy (2019)
Working Paper: Environmental policy and firm selection in the open economy (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:tudcep:0419

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