Trade in Trash: A Political Economy Approach

James Cassing and Ngo Long

No 8522, CESifo Working Paper Series from CESifo

Abstract: We study how the opportunity to trade in trash might influence the equilibrium outcome when the tax on the externality is determined by a political economy process. In our model, individuals have heterogeneous preferences for environmental quality, and there is a leakage when funds are transferred from the pressure groups to the politicians. When hard-core environmentalists and capitalists are organized interest groups while moderate environmentalists are not organized, we find that the politically chosen tax on the externality is below the optimal Pigouvian level. The opportunity to export waste in unlimited quantities, but at a price, is not the environmentalists’ panacea and does not eliminate political social tension and suboptimal results.

Keywords: trade in trash; interest groups; externalities; environmental lobby; political economy; trade and environment (search for similar items in EconPapers)
JEL-codes: D72 F18 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-env, nep-int and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Trade in trash: A political economy approach (2021)
Working Paper: Trade in Trash: A Political Economy Approach (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_8522

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