THE EFFECTS OF ENVIRONMENTAL TAXES An empirical study of water and solid waste levies in Flanders*

ABSTRACT ** ** Résumé en fin d'article; Zusammenfassung am Ende des Artikels; resúmen al fin del artículo.
: Environmental problems are considered by the majority of economic agents as important factors in making public policy. As a result, economic and market-integrated instruments are increasingly being used as alternatives to traditional environmental policy instruments. This article aims to determine the actual effect of environmental taxes on pollution levels. In particular, a case study of Flemish environmental taxes on water and solid waste pollution is reported. A quantitative model for testing the actual effectiveness of environmental taxes is developed, based on similar studies that analysed Dutch environmental policy. The conclusions of this analysis are extended with a qualitative analysis of information provided by in-depth interviews. Data-driven empirical research of the Flemish situation does not confirm the expected direct relationship between an increase in taxation and a decrease in pollution. In general, industrial firms do not consider the present taxation system a legitimate one for changing their polluting activities. As a result, the greening’of management is limited and environmental taxes are considered by the majority of firms as a mere business taxation rather than a system to create a switch from polluting to non-polluting behaviour.     

Two-Part Trade Policy under Imperfect Competition

In this paper we consider the potential gain of a government pursuing a two-part trade policy: an import license for entry, along with a per-unit tariff on imports. The model is a two-stage game of complete but imperfect information. In the first stage, the domestic government sets trade policy, while in the second stage the home and foreign producers behave as Cournot competitors. The paper demonstrates that the optimal trade policy depends upon the number of firms, the degree of heterogeneity in cost functions, and the degree of convexity in cost functions.     

Waste disclosure and corporate cash holdings

ABSTRACT

In this paper, we address an important and emerging question: Can firms’ voluntary waste disclosure affect corporate cash holdings? Using a sample of S&P 500 firms, we find strong evidence for a positive relationship between waste disclosure and the cash holding policy of firms. Furthermore, we find that waste disclosure significantly increases cash holdings only for firms with strong corporate governance quality. We also find that the significant relationship between waste disclosure and cash holdings remains unchanged only for firms that operate in environmentally sensitive industries. Our paper provides novel evidence on the role of voluntary waste disclosure as an environmental dimension that influences the cash policy of firms and highlights the little-known issue of waste disclosure as a significant research topic.     

Differential Provision of Solid Waste Collection Services in the Presence of Heterogeneous Households

A model of household refuse production is presented in which individuals differ in their distaste for the waste stock and the supply of waste collection services is continuous in pick-up frequency. The inclusion of pick-up frequency into household solid waste management analyses has already been shown to have policy implications. In fact, even in the absence of the waste stock externality, a system of uniform consumption taxes and legal (or curbside) disposal and recycling subsidies has been found to be necessary (and sufficient) to induce households to socially optimally allocate their resources when illegal disposal (or simply dumping) incentives exist but a per unit punishment system for dumping is lacking. This policy is here concluded to be no longer feasible; instead, a system of differential consumption taxes and recycling subsidies and uniform legal disposal subsidies is found to be optimal (but possibly nonimplementable). In the presence of heterogeneous households, which are however identifiable on the basis of their relative location to the landfill site, an optimal and implementable policy is then shown to require a differential provision of collection services.     

Patent licensing under cost asymmetry among firms

This paper extends Poddar and Sinha's (2010) duopolistic model to an oligopolistic model consisting of three cost differential firms engaging in Cournot competition. The focus of the paper is on the impact of the differences in efficiency among the three firms on the choices of the patentee's optimal licensing contract. By confining the number of licenses to one license only, the paper derives a more comprehensive result than that in Poddar and Sinha (2010). In addition, it shows that the insider patentee may choose pure fixed-fee, mixed or pure royalty licensing regardless of licensing to one or two licensees. This paper also proves that the optimal licensing contract can be either exclusive or non-exclusive, depending upon the relative cost advantage between the two licensees.     

An economic analysis of mixing wastes

Using a general equilibrium model with heterogeneous waste, this paper studies optimal waste policy when households have to exert separation effort to produce homogeneous waste streams suitable for recycling. Our model explicitly allows for changes in the composition (quality) of waste streams depending on how much effort households are willing to spend on separating different types of waste. Accordingly, we are able to generalize some earlier contributions to the waste management literature and demonstrate that with both mixing and effort included, a first-best optimum is feasible under reasonable conditions. In particular, we find that a (modified) deposit-refund system still provides the optimal incentives to guide recycling as well as legal disposal (landfilling) and illegal dumping. Both the number and level of taxes and subsidies needed to reach the first-best depend crucially on the socially optimal level of dumping as well as the socially optimal composition of the mix. We are grateful to two anonymous referees, Leon Bettendorf, Elbert Dijkgraaf, Don Fullerton and Matthieu Glachant for constructive comments and useful discussions on an earlier version of this paper.     

Industrial Policy and Firm Heterogeneity

Our concern in this paper is with firm-specific industrial policy. When R&D subsidies or taxes are differentiated among firms, the question arises as to which firms in an industry should receive such support. We analyze a situation where firms differ in their R&D technologies in two distinct ways: in the costs of performing R&D activities and in the output obtained from such activities. We find that the optimal firm-specific industrial policy is affected differently by the two sources of firm heterogeneity. Furthermore, a change in a firm's R&D productivity has an ambiguous effect on the optimal policy towards the firm.
JEL classification: O 31; L 52; F 13     

银行竞争与僵尸企业去杠杆

本文将银监会公布的金融许可证信息与中国工业企业数据库相匹配,考察了银行竞争对僵尸企业资本结构动态调整的影响机理。研究发现,银行竞争通过提高僵尸企业的融资成本显著加快了其资本结构调整速度,尤其是降杠杆的幅度。进一步研究表明,在货币政策宽松期,银行竞争对僵尸企业降杠杆的促进效果会更明显。此外,预算软约束小、外部融资依赖程度高、规模小的僵尸企业去杠杆的速度更快。本文立足于中国金融体系深化开放的现实情境,聚焦于僵尸企业这一特定主体的资本结构决策,为金融市场的竞争机制如何助力僵尸企业去杠杆提供了一定经验证据。     

Public Goods and Tax Competition in a Two‐Sided Market

A rather neglected issue in the tax competition literature is the dependence of equilibrium outcomes on the presence of firms and shoppers (two‐sided markets). Making use of a model of vertical and horizontal differentiation, within which jurisdictions compete by providing public goods and levying taxes in order to attract firms and shoppers, this paper characterizes the noncooperative equilibrium. It also evaluates the welfare implications for the jurisdictions of a popular policy of tax coordination: The imposition of a minimum tax. It is shown that the interaction of the two markets affects the intensity of tax competition and the degree of optimal vertical differentiation chosen by the competing jurisdictions. Though the noncooperative equilibrium is, as it is typically the case, inefficient such inefficiency is mitigated by the strength of the interaction in the two markets. A minimum tax policy is shown to be effective when the strength of the interaction is weak and ineffective when it is strong.     

INDUSTRIAL LICENSING,BRIBERY AND ALLOCATION EFFICIENCY*

In less developed countries where an industrial licensing policy governs the entry of new firms, and when government officials awarding these licenses are corrupt, an incumbent firm may deter entry by bribing the official to deny the license. The paper demonstrates that such bribery can lead to the exclusion of more efficient firms from the market. This contradicts the established result that bribery does not affect allocation efficiency.     

Export rivalry,vertically-related markets,and optimal public ownership policy

This paper considers the optimal public ownership policy of an upstream firm which competes with a foreign private rival. Both firms supply a produced input to the domestic and foreign downstream firms that compete in an export market. The paper shows that complete privatization of the domestic upstream firm is never optimal. It will likely be fully nationalized if its market share is high, the domestic downstream firms' market share is low, and the total number of firms in the downstream is large. Simulation results reveal that the public firm's optimal profit margin may be negative and that the government ownership level may exhibit a reswitching phenomenon as the number of domestic downstream firms keeps growing. The paper sheds light on the possibility of using government ownership policy as a pseudo-trade and industrial policy.     

Public Enterprise Privatization: A General Equilibrium Analysis

This paper develops a general equilibrium model to examine the short‐run and long‐run optimal privatization policies. By assuming that all firms are public firms initially, the paper focuses on how the degree of product differentiation γ and the average efficiency of the industry influence the determination of the optimal privatization policy. The paper shows that privatization decreases the more efficient firms' outputs while increases the less efficient firms' outputs in the short run, and reduces all firms' outputs in the long run. The paper also shows that the larger is γ and the smaller is the number of firms, the more privatized will be the public firm in the short run. Moreover, as γ or the entry barrier f_E is sufficiently small, full privatization is the best policy in the long run. On the contrary, as γ and f_E are large enough, partial privatization is optimal.     

R&D policy in a vertically related industry

In this paper, we analyze the effectiveness of public policy aimed to stimulate business-performed R&D in a vertically related market. We examine the role of an R&D active upstream supplier in a four-stage R&D model, where we incorporate public funding. The considered policy instrument is direct funding of firms’ R&D efforts. We calculate the optimal policies and show that they have a positive impact on firms’ R&D investments. From a welfare point of view, it is optimal to differentiate the subsidy rates between the upstream and the downstream markets. Competition in the product market leads to a higher subsidy rate to the upstream supplier than to the downstream firms. When concentration is high in the downstream market, the optimal solution is an R&D subsidy for these firms, otherwise the optimal solution is an R&D tax for the downstream firms.     

Cooperative R&D and strategic trade policy

Abstract.  In this paper three different cooperative R&D arrangements in a strategic trade policy model are examined. A policy game between two governments is analysed, where each government chooses a particular cooperative R&D policy in order to maximize national welfare. Allowing cooperation in R&D is also compared with the use of R&D subsidies. It is jointly optimal for both governments to allow their firms to participate in the same type of cooperative R&D, and allowing cooperation in R&D can be superior to the use of R&D subsidies. JEL Classification: F13, L24     

Trade Policy in the Presence of Technology Licensing*

We consider strategic trade policy when a high‐cost and a low‐cost firm belonging to two different countries compete in quantities in a third country, and technology is transferable via licensing. We characterize the effects of subsidies on (i) licensing payments—a new source of rents, (ii) the decision to license, and (iii) the subsidy bill difference (compared to when licensing is infeasible). We find that, in the presence of licensing, optimal strategic trade policy has several interesting features. For example, even under Cournot competition, optimal policy can be an export tax instead of an export subsidy. Also, unlike results in strategic trade policy with asymmetric costs, we find that optimal export subsidies are not necessarily positively related to the cost‐competitiveness of firms. In other words, governments need not necessarily favor “winners” when licensing is possible. Furthermore, there exist parameterizations such that a government, if it can, might ban licensing.     

On the International Linkages between Trade and Merger Policies*

In a three‐country model, this paper investigates linkages between merger incentives of exporting firms and the trade policy of an importing country. When exporting firms come from only one country, the tariff response of the importing country reverses the welfare effects of a merger in the exporting country. If there exist two exporting countries, a merger creates two types of conflicting international externalities. First, a merger in one exporting country increases profits of all firms. Secondly, non‐merged firms lose if the importing country is free to raise its tariff in response to a merger of foreign exporters.     

Strategic Delay in a Real Options Model of R&D Competition

This paper considers irreversible investment in competing research projects with uncertain returns under a winner-takes-all patent system. Uncertainty takes two distinct forms: the technological success of the project is probabilistic, while the economic value of the patent to be won evolves stochastically over time. According to the theory of real options uncertainty generates an option value of delay, but with two competing firms the fear of preemption would appear to undermine this approach. In non-cooperative equilibrium two patterns of investment emerge depending on parameter values. In a pre-emptive leader–follower equilibrium firms invest sequentially and option values are reduced by competition. A symmetric outcome may also occur, however, in which investment is more delayed than the single-firm counterpart. Comparing this with the optimal cooperative investment pattern, investment is found to be more delayed when firms act non-cooperatively as each holds back from investing in the fear of starting a patent race. Implications of the analysis for empirical and policy issues in R&D are considered.     

On Reform Intensity under Uncertainty

We model policy reform as a way to affect the stochastic process of relative returns that firms face when switching from old to new activities. This stochastic process has an Ito process component that is noncontrollable and policy reforms result in jumps in relative returns that arrive according to a Poisson process. The intensity of policy reform depends on the arrival rate and magnitude of jumps. We use a single firm model to understand the reaction of the firm to such a stochastic process and the usual hysteresis results in switching between old and new activities. Aggregation to the level of all firms leads to an appropriate definition of the government payoff function, and we use this to obtain the optimal level of reform. The results are as follows: there exists an optimal level of radical reform that overcomes the hysteresis behavior of firms; if such a level is not desirable, then the intensity of policy reform is not at an extreme point; and this gradual level of optimal reform is lower if uncertainty is higher.J. Comp. Econom.,December 1997,25(3), pp. 297–321. Sloan School of Management, Massachusetts Institute of Technology, Cambridge, Massachusetts 02142; Olin School of Business, Washington University, St. Louis, Missouri 63130; and IBM, Armonk, New York 10504.     

Local Currency Pricing versus Producer Currency Pricing: Direct Evidence from German Exporters

Abstract. In new open-economy macroeconomic models, the assumption on the pricing behavior of firms in international trade plays a central role. Whether firms apply producer currency pricing (PCP) or local currency pricing (LCP) crucially affects, for example, the design of optimal monetary policy or the choice of the optimal exchange rate system. However, empirical evidence has so far been mixed and is furthermore mostly of an indirect nature. This paper draws direct evidence on the price-setting behavior of German exporters from a questionnaire-based survey. We find that PCP applies in more integrated markets. Differences between LCP firms and PCP firms mainly exist with respect to the use of mark-ups and in the validity of the law of one price for their respective products.     

An economic analysis of the Packaging waste Recovery Note System in the UK

In order to cope with the increasing scarcity of final dump sites for household wastes, the UK recently introduced an environmental policy targeted at the firms that produce and sell products that generate packaging wastes. This policy requires such businesses to hold predetermined numbers of tradable credits called “Packaging waste Recovery Notes” (PRNs). This article provides insights into the economic implications of such a policy through a simple analytical model of a recyclable product and the PRN markets. Our analysis yields two particularly interesting results. First, an increase in the required recycling rate dampens the output and landfill waste levels, while the effect on the level of recycling activities is ambiguous. Second, an increase in the landfill tax always leads to an increase in the landfill waste. We also discuss how the socially optimal landfill tax in the presence of the PRN market should be chosen.