A Model of Competing Jurisdictions with Locally Polluting Environments and Mobile Populations

Vincent Hildebrand and Charles Plourde ()

Environmental & Resource Economics, 2001, vol. 18, issue 2, 219-231

Abstract: In this model we consider a federation consisting oftwo geographically separated Regional states withlocal taxing authority. The residents of thefederation are identical in preferences and haveexplicit tolerance to pollution. Pollution is local innature and is a by-product of production implying amore highly populated region would generate morepollution. Local authorities in the regions can andwill (in the interest of local residents) engage ingame theoretical taxation strategies. The model isused to illustrate that Nash Equilibrium can resultwherein the two regions have different levels ofenvironmental quality. The resulting Nash conditionsimply for instance that residents of the ``cleanregion'' will subsidize those in the other region tostay in the more polluted environment (in order foreach to accomplish their preferred consumption andenvironmental quality pair). Copyright Kluwer Academic Publishers 2001

Keywords: efficiency; environment; federation; interregional transfers; pollution (search for similar items in EconPapers)
Date: 2001
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DOI: 10.1023/A:1011115932370

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