Strategic Environmental Policy and the Accumulation of Knowledge

Thomas Ziesemer () and Peter Michaelis ()
Additional contact information
Thomas Ziesemer: University of Augsburg, Department of Economics
Peter Michaelis: University of Augsburg, Department of Economics

No 301, Discussion Paper Series from Universitaet Augsburg, Institute for Economics

Abstract: Recent political discussions about the possible advantages of first-mover behaviour in terms of environmental policy again called attention to the well-established controversy about the effects of environmental regulation on international competitiveness. Conventional theory claims that the trade-off between regulation and competitiveness will be negative while the revisionist view, also known as the Porter Hypothesis, argues for the opposite. Several previous attempts that analysed this quarrel by means of strategic trade game settings indeed support the former claim and conclude that, to increase a firm’s competitiveness, ecological dumping is the most likely outcome in a Cournot duopoly configuration. However, these results were derived from one period games in which so-called innovation offsets are unlikely to occur. The present paper considers a two-period model that includes an intertemporally growing firm-level knowledge capital. In doing so the accumulation of knowledge is modelled in a unilateral and a bilateral variant. It is shown that for both scenarios in period 1 the domestic government will set a higher emission tax rate compared to its foreign counterpart. Furthermore, we identify conditions for which the domestic tax rate will be set above the Pigouvian level in period 1 in both model variants.

Keywords: first-mover behaviour; Porter Hypothesis; strategic environmental policy; environmental regulation; international competitiveness (search for similar items in EconPapers)
JEL-codes: F18 Q55 Q58 (search for similar items in EconPapers)
Date: 2008-08
New Economics Papers: this item is included in nep-cse, nep-env and nep-knm
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://opus.bibliothek.uni-augsburg.de/opus4/files/71132/301.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aug:augsbe:0301

Access Statistics for this paper

More papers in Discussion Paper Series from Universitaet Augsburg, Institute for Economics Universitaetsstrasse 16, D-86159 Augsburg, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Dr. Simone Raab-Kratzmeier ().