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Competition in emissions standards and capital taxes with local pollution

Thomas Eichner and Rüdiger Pethig ()

Regional Science and Urban Economics, 2018, vol. 68, issue C, 191-203

Abstract: This paper analyzes the competition in emissions standards and capital taxes when production causes local pollution and large jurisdictions act strategically. It is shown that emissions standard competition both with and without capital tax competition results in inefficient outcomes. The more productive jurisdiction imports capital and sets inefficiently tight emissions standards, whereas the less productive jurisdiction chooses inefficiently lax emissions standards. Adding capital tax competition improves local pollution, but exacerbates the capital distortion and the efficiency loss of emissions standard competition.

Keywords: Emissions standard; Capital tax; Local pollution; Tax competition (search for similar items in EconPapers)
JEL-codes: H23 H41 Q58 (search for similar items in EconPapers)
Date: 2018
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