Strategic Environmental Policy under Free Trade with Transboundary Pollution

We analyze the effects of trade liberalization on environmental policies in a strategic setting when there is transboundary pollution. Trade liberalization can result in a race to the bottom in environmental taxes, which makes both countries worse off. This is not due to the terms of trade motive, but rather the incentive, in a strategic setting, to reduce the incidence of transboundary pollution. With command and control policies (emission quotas), countries are unable to influence foreign emissions by strategic choice of domestic policy; hence, there is no race to the bottom. However, with internationally tradable quotas, unless pollution is a pure global public bad, there is a race to the bottom in environmental policy. Under free trade, internationally nontradable quotas result in the lowest pollution level and strictly welfare‐dominate taxes. The ordering of internationally tradable quotas and pollution taxes depends, among other things, on the degree of international pollution spillovers.     

Environmental Policy, Intra-Industry Trade and Transfrontier Pollution

The paper discusses effects of domestic environmental policy on foreignemissions and on transboundary pollution. We use a Dixit-Stiglitz typemodel of monopolistic competition with an endogenous number of firms.Production generates environmental externalities which spill over to theother country. It is shown that environmental policy has an impact onmarket structure at home and abroad. These market structure effectsinduce changes in emissions abroad. In contrast to what has been derivedin earlier contributions, it turns out to be possible that tighterenvironmental standards at home lead to less emissions abroad. The paperderives these results and provides the economic intuition behind them.Finally, conditions for optimal environmental policies are derived.     

贸易自由化、纵向关联市场与战略性环境政策——环境税对发展绿色贸易的意义

本文在一个两国出口至第三国的连续双寡模型中,研究贸易自由化对均衡环境政策及社会福利的影响。分析发现:(1)战略性环境政策的租金攫取效应可通过中间产品出口实现,但不一定会通过最终产品出口实现。(2)当污染的环境损害程度不大时,贸易自由化将降低各国环境税,从而使各国的环境保护出现"向底线赛跑";当环境损害系数较大时,贸易自由化将提高各国环境税。(3)社会福利水平为双边关税壁垒的凹函数(呈"倒U型"),贸易自由化对社会福利的影响不确定。此外,本文还分析了合理征收环境税对发展我国绿色贸易的意义。     

Pollution Policy and Trade Liberalization of Environmental Goods

During the Doha Round at the World Trade Organization, reductions in trade barriers on environmental goods (EG) were put forward as a means of helping developed and developing countries alike deal with current environmental problems. We examine the potential effectiveness of such a strategy in a developing country that imports all its consumption of EG from an imperfectly competitive foreign eco-industry. We point out that trade liberalization of EG might in fact lead to less stringent pollution taxes, which can result in an actual rise in pollution levels. We then show that the environmental effectiveness objective of this trade reform can be achieved when the regulator uses quantitative abatement standards as an alternative pollution policy instrument. However, this environmental achievement comes at the expense of social welfare.     

Learning-by-Doing and Strategic Trade Policy

The paper models international rivalry between a domestic firm that is going through a learning-by-doing phase, and a mature foreign rival. It is shown that the optimal production subsidy for the domestic firm depends on the degree of strategic sophistication of the foreign firm. Optimal production subsidy rules are derived under various scenarios. They are shown to be very sensitive to the specification of the game between the domestic and the foreign firms. Whether the optimal subsidy should decrease over time depends on the strategic sophistication of the foreign firm.     

Strategic Trade Policy and Vertical Structure

We introduce intermediaries into the Brander-Spencer model of strategic trade policy. A key finding is that in regimes involving independent retailers, output competition and linear pricing (and two-part tariffs under certain restrictions), the optimal policy involves an export tax instead of a subsidy. If firms commit to vertical structure before governments commit to policy then under output competition firms choose integration, whereas if policy precedes structure then at least one firm chooses separation. Under price competition separation is a dominant strategy regardless of whether the structure decision is made before or after the policy decision.     

Free Entry, Quasi-Free Trade, and Strategic Export Policy

This paper analyzes governments' choices between strategic export subsidies and free trade as a commitment when firms are free to enter or exit in response to these choices. Entry and exit is treated as a discrete process. Within the context of a four-stage game, two types of equilibria emerge: a quasi-free-trade equilibrium in which one of the two governments commits to free trade, while the other has a Nash equilibrium subsidy that is zero and bilateral export subsidies. Concerning welfare effects, if fixed costs are large enough, both countries achieve a welfare gain relative to free trade.     

International R&D Collaboration and Strategic Trade Policy

We study an international trade model with symmetric countries and symmetric firms, with countries making strategic trade policies, anticipating the decisions of firms on R&D collaboration at the subsequent stage. In general we should observe a conflict between the equilibrium outcome and the efficient one. We find that an asymmetric outcome where one country unilaterally liberalizes trade while the other does not is likely to occur. We also find that while banning international R&D collaboration may help to reach free trade equilibrium in certain situations, it provides little assistance in reaching the outcome that maximizes global welfare.     

Foreign Ownership,Equity Arbitrage and Strategic Trade Policy *

This paper investigates whether the cost of environmental regulation influences the international location of polluting industries. Industries that operate production facilities in developing countries are identified through their use of the offshore assembly provisions in the U.S. tariff Code. Pollutions Intensity of industry output is found to significantly reduce the probability of conducting offshore assembly in developing countries. This finding contradicts the arguments that developing countries are becoming pollution havens as a result of offshore assembly independent of their general disregard for the environment. Integrating production across national boundaries might actually enhance worldwide environmental quality. Relatively clean stages of the production process are being transferred to developing countries with lax environmental regulations, while polluting segments remain in the U.S. where strict environmental controls are enforced. [F1, Q2]     

Strategic Trade Policy with Heterogeneous Costs

The paper examines optimal strategic trade policy under a heterogeneous cost oligopoly. The first‐best policy involves a structure of firm‐specific export subsidies/taxes in which the government favours the most efficient firms only with a sufficiently low social cost of public funds.     

财政分权下地区间环境管制的相互影响

本文考察我国财政分权下地区间在环境管制上的相互影响。已有研究强调中国分权式改革对地区经济发展的促进作用,但经济发展带来的严重环境污染问题,要求讨论财政分权对环境治理的影响。本文首先通过一个简单的理论模型对地区之间在环境管制上的策略性行为进行了分析,随后利用我国实际的省级数据对地区之间在环境管制上的相互影响进行了考查。我们的研究发现,财政分权下,地区对经济增长的追求导致地区之间在对环境治理上可能存在策略性行为。在实际的环境管制上,地区之间存在"搭便车"现象,其它地区环境管制对本地区环境管制产生的作用为负,我国地区之间在环境管制上存在一定程度的"竞争到次"现象。     

Strategic Trade Policy Under Incomplete Information

This paper examines equilibrium trade policies when firms have better information than governments about the profitability of the industry. Contrary to the intuition that the policymakers' lack of information should reduce their incentives to engage in strategic trade intervention, the analysis suggests that information asymmetries may increase trade policy distortions in equilibrium and ultimately worsen the "prisoner's dilemma" between governments.     

Strategic Trade Policy Under Uncertainty*

This paper extends the Brander-Spencer (1985) model by considering market uncertainty, exploring nonlinear policy, and examining firms' choices of strategic variables. By investigating the interrelationship between trade policy and market conduct, we find that unlike the often-studied linear policy, a nonlinear policy can influence the domestic firm's choice of strategic variables and hence alter the market conduct in favor of the domestic country. Therefore, a nonlinear policy proves strictly superior to a linear one.     

Strategic Trade and Industrial Policy Towards Dynamic Oligopolies

We characterise optimal trade and industrial policy in dynamic oligopolistic markets. If governments can commit to future policies, optimal first-period intervention should diverge from the profit-shifting benchmark to an extent which exactly offsets the strategic behaviour implied by Fudenberg and Tirole's 'animal spirits' taxonomy of business strategies. Without government commitment, there is an additional basis for intervention, whose sign depends on the strategic substitutability between future policy and current actions. We consider a variety of applications (to R&D spillovers, consumer switching costs, etc.) and also extensions to constrained second-best policies.     

Strategic Environmental Policy, Clean Technologies and the Learning Curve

In the political discussion, it is often emphasized that the environmental service industry (which produces a clean factor of production) benefits from an early and strong environmental policy. This is especially likely if the costs of production are decreasing over time due to learning curve effects. Surprisingly, the environmental service industry has not been integrated into the theory of strategic environmental policy yet. Our main question is whether a national leadership in environmental policy can pay off if profits of the environmental service industry are taken into account. We consider a two-period model with one firm in each country competing on a third market. Emissions can be substituted by the clean factor when deciding upon the production technology. The unit costs of producing the clean factor in the second period are decreasing in the quantity produced in the initial period. We derive the optimal environmental policy for both periods from a national point of view and show that the presence of the environmental service industry can indeed lead to a national leadership in pollution control.     

Strategic Trade Policy and Signalling with Unobservable Costs

In an environment in which home firm costs are private information, home firm output can signal these costs to a foreign competitor and a home policymaker. High-cost home firms have an incentive to misrepresent themselves as low-cost. This is understood by the foreign firm and the home policymaker and results in the first-period optimal per-unit output subsidy to the home firm being less than it would be if home firm output was not a signal of home firm costs. These results are extended to the case of simultaneous signalling and signalling through price.     

Strategic Environmental Policy Under Incomplete Information

This paper introduces incomplete information into recent analyses of strategic environmental policy. It is shown how asymmetric information between planners and producers affects national incentives to impose strategic environmental standards on domestic industries in international oligopolistic competition. Relative to the full-information case, incomplete information is likely to mitigate allocative distortions originating from strategic behaviour. A countervailing effect, tending to raise distortion, is however revealed from the analysis. This effect is absent when governments intervene in free trade through direct production subsidies. The results suggest that incentives to capture foreign rents are less reduced due to private information, when environmental standards, rather than direct production subsidies, are the strategic instrument.     

战略贸易政策新进展与发展中国家贸易政策

通过对战略贸易政策在贸易的政治经济学、不确定性、不完全承诺和不完全信息等四个方面的新进展进行讨论,得出结论:新贸易理论的新进展使得脱胎于发达国家的战略贸易政策更加接近发展中国家市场经常失灵的现实,从而对发展中国家的贸易政策有重要的指导意义。     

Pollution,Private Investment in Healthcare,and Environmental Policy*

In this paper, we demonstrate that, in a two‐period overlapping‐generations model, the relationship between environmental taxation and economic activity (output level and growth) has an inverted‐U shape when we take into account the detrimental impact of pollution on health and the individual decision of each working‐age agent to improve her health. We also demonstrate that the link between environmental tax and lifetime welfare also has an inverted‐U shape, and that a tighter environmental policy might enhance economic activity while reducing steady‐state lifetime welfare. Finally, we investigate the social optimum and the determinants of the optimal environmental tax.