Regional taxation versus national taxation with transboundary pollution

Taxation régionale versus nationale en présence de pollution transfrontalière

Michel Cavagnac () and Isabelle Pechoux
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Isabelle Pechoux: LERNA - Economie des Ressources Naturelles - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - INRA - Institut National de la Recherche Agronomique - CEA - Commissariat à l'énergie atomique et aux énergies alternatives, UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse

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Abstract: We consider a two-country model of strategic trade with transboundary pollution. Environmental policy may be decided either at the regional level or at the national level. We study how changing the decision center impacts on, respectively, trade, firms' profit, environmental damage, regional and national welfare. We show that a centralized policy turns out to be in favour of domestic firm's profit but at the cost of a bad environmental quality. Concerning the usual criterion of social welfare, we show that the policy adopted by a regional decision-maker, only concerned by local considerations, might implement a national welfare higher than the welfare achieved by a national regulator.

Keywords: TAXATION (search for similar items in EconPapers)
Date: 2010
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Published in Revue Economique, 2010, 61 (1), pp.31-48. ⟨10.3917/reco.611.0035⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02660174

DOI: 10.3917/reco.611.0035

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