Trade Liberalization and Environmental Taxation in Federal Systems

Per Fredriksson and Xenia Matschke

No 4717, CESifo Working Paper Series from CESifo

Abstract: The literature on trade liberalization and environment has not considered federal structures. This paper shows how the design of environmental policy in a federal system has implications for the effects of trade reform. Trade liberalization leads to a decline in pollution taxes regardless of whether pollution taxes are set at the federal (centralized) or local (decentralized) level, and it increases social welfare. The effect under a decentralized system is smaller than if these taxes are set by the federal government, and pollution emissions therefore decline in this case. Moreover, majority bias interacts with trade liberalization if federal taxes are used.

Keywords: trade and environment; environmental policy; trade liberalization; environmental federalism; political economy; majority bias; social welfare (search for similar items in EconPapers)
JEL-codes: F10 H20 H70 Q20 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Trade Liberalization and Environmental Taxation in Federal Systems (2016)
Working Paper: Trade Liberalization and Environmental Taxation in Federal Systems (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_4717

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