Optimal emission tax with endogenous location choice of duopolistic firms

Masako Ikefuji, Jun-ichi Itaya () and Okamura Makoto

No 257, Discussion paper series. A from Graduate School of Economics and Business Administration, Hokkaido University

Abstract: This paper explores an optimal environmental tax policy when polluting firms strategically choose the location of their plants in a three-stage game. We examine how the relationship between the optimal environmental tax and the plant location choices of duopolistic firms affects the welfare of the home country. We show that even if the duopolistic firms are identical ex ante, an asymmetric equilibrium may emerge in which either of the two firms relocates its plant in the foreign country. We also show that despite the persistence of globalization, the firms move back their relocated plants to the home country, thus causing the resulting welfare to decline.

Keywords: Environmental policy; Globalization; Relocation; Welfare (search for similar items in EconPapers)
Pages: 38 pages
Date: 2013-04
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Optimal Emission Tax with Endogenous Location Choice of Duopolistic Firms (2016)
Working Paper: Optimal Emission Tax with Endogenous Location Choice of Duopolistic Firms (2010)
Working Paper: Optimal Emission Tax with Endogenous Location Choice of Duopolistic Firms (2010)
Working Paper: Optimal emission tax with endogenous location choice of duopolistic firms (2009)
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