Centralized versus decentralized taxation of mobile polluting firms |
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| Authors: | Georges A. Tanguay Nicolas Marceau |
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| Affiliation: | a Department of Economics and Canadian-American Center, University of Maine, 215 Stevens Hall, Orono, ME 04469-5774, USA;b Département des sciences économiques and CREFÉ, Université du Québec à Montréal, C.P. 8888, Succ. Centre-Ville, Montréal, Que., Canada H3C 3P8 |
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| Abstract: | We consider a world in which a mobile polluting firm must locate in one of two regions. The regions differ in two dimensions: their marginal cost of pollution and the production cost of the firm. It is shown that under incomplete information on regional marginal costs of pollution, fiscal competition may lead to the sub-optimal location of the firm. We also show that under incomplete information, a sub-optimal location is less likely under centralized than under decentralized taxation. |
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| Keywords: | Fiscal competition Location Pollution |
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