Environmental policy uncertainty, policy coordination and relocation decisions
Tom Verbeke () and
M. de Clercq ()
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M. de Clercq: -
Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium from Ghent University, Faculty of Economics and Business Administration
Abstract:
We analyse the relocation decision of a firm who is producing in one country (home country) but has the opportunity to relocate. The firm is faced with uncertain environmental policy formation both at home as well as in the foreign country. We allow for international environmental policy coordination and for environmental policy risks to be correlated with economy-wide risk. We show that the impact of uncertainty on the relocation decision depends on the absolute level of uncertainty. However, this relationship is substantially affected by the existence of policy coordination and the correlation between environmental policy uncertainty and economy-wide risks. In the case of coordinated environmental policies for instance, an Ushaped relation between uncertainty and relocation emerges.
Keywords: Location decision; policy uncertainty; environmental policy coordination; option (search for similar items in EconPapers)
JEL-codes: D21 F18 Q28 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2003-12
New Economics Papers: this item is included in nep-env and nep-mic
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Citations: View citations in EconPapers (3)
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Persistent link: https://EconPapers.repec.org/RePEc:rug:rugwps:03/208
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