Developing Country Second-Mover Advantage in Competition over Environmental Standards and Taxes

Valeska Groenert and Benjamin Zissimos

No 3686, CESifo Working Paper Series from CESifo

Abstract: We show that, in competition between a developed country and a developing country over environmental standards and taxes, the developing country may have a ‘second-mover advantage.’ In our model, firms do not unanimously prefer lower environmental-standard levels. We introduce this feature to an otherwise familiar model of fiscal competition. Four distinct outcomes can be characterized by varying the marginal cost to firms of an environmental externality: (1) the outcome may be efficient; (2) the developing country may be a ‘pollution haven’ - a place to escape excessively high environmental standards in the developed country; (3) the developing country may ‘undercut’ the developed country and attract all firms; (4) the developed country may be a pollution haven.

Keywords: environmental standards; fiscal competition; second-mover advantage; tax competition. (search for similar items in EconPapers)
JEL-codes: H10 H25 H73 H87 (search for similar items in EconPapers)
Date: 2011
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Related works:
Journal Article: Developing Country Second-Mover Advantage in Competition Over Environmental Standards and Taxes (2013)
Working Paper: Developing Country Second-Mover Advantage in Competition over Environmental Standards and Taxes (2011)
Working Paper: Developing Country Second-Mover Advantage in Competition over Environmental Standards and Taxes (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_3686

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