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Fiscal Competition and Polluting Firm' Location Under Incomplete Information

G.A. Tanguay and Nicolas Marceau ()

Working Papers from Laval - Recherche en Energie

Abstract: The main result of this paper is that when two asymmetric regions compete in pollution taxes to attract a polluting firm, optimal location will happen under complete information but not necessarily under incomplete information. It is shown that incomplete information on regions' pollution costs may lead to a bias towards location in a region that does not maximize net total benefits. This bias is more likely to occur if a region believes that the other region has a ``high'' marginal cost of pollution. Also, this bias tends to disappear with large discrepancies in production costs.

Keywords: FISCAL POLICY; COMPETITION; LOCATION; POLLUTION (search for similar items in EconPapers)
JEL-codes: R38 H73 Q28 (search for similar items in EconPapers)
Pages: 16 pages
Date: 1998
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