 Make and buy in a polluting industryTakeshi Iida and Arijit Mukherjee Journal of Public Economic Theory, 2020, vol. 22, issue 6, 1852-1874 Abstract: The literature paid significant attention to analyze the rationale for the make‐or‐buy strategy of firms. However, a related empirically relevant strategy of make and buy did not get much attention. We show that the presence of tax/subsidy policies, which are particularly important in the presence of environmental pollution, may create a rationale for the make‐and‐buy strategy of firms. Thus, we provide a new rationale for the make‐and‐buy strategy of firms which is different from the existing reasons, such as uncertainty, market power of the input suppliers, moral hazard, and capacity utilization. We also show that international harmonization, where countries set taxes cooperatively, can promote outsourcing compared with the situation where the countries set taxes non‐cooperatively. Further, global welfare maximizing outsourcing is less than the harmonization case. While global welfare is higher under global welfare maximization compared with harmonization, the total environmental damage can be lower under the latter case than the former case. Hence, higher welfare not necessarily implies lower environmental damage. Date: 2020 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bla:jpbect:v:22:y:2020:i:6:p:1852-1874 Ordering information: This journal article can be ordered from Access Statistics for this article Journal of Public Economic Theory is currently edited by Rabah Amir, Gareth Myles and Myrna Wooders More articles in Journal of Public Economic Theory from Association for Public Economic Theory Contact information at EDIRC. |
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