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Strategic Environmental Policy, International Trade and Self-enforcing Agreements: The Role of Consumers' Taste for Variety

Michael Finus () and Alaa Al Khourdajie ()

No 60/17, Department of Economics Working Papers from University of Bath, Department of Economics

Abstract: We study the co-ordination of environmental policy within an agreement in the context of international trade. In a-n country intra-industry trade model, firms produce a horizontally differentiated good and consumers have a taste for variety. Governments chose strategically an emmission tax and their membership in an international agreement. We show that only a strong taste for variety reduces the competition among governments sufficiently enough to to allow for some form of policy coordination, though full cooperation will never be obtained.

Date: 2017-02
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Journal Article: Strategic Environmental Policy, International Trade and Self-enforcing Agreements: The Role of Consumers' Taste for Variety (2018) Downloads
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