Ecological dumping under foreign investment quotas |
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Authors: | Yasuyuki Sugiyama and Muneyuki Saito |
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Institution: | (1) Facultad de Ciencias Economicas y Empresariales, University of A Coru?a, Campus de Elvi?a, 15071 A Coru?a, Spain |
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Abstract: | In this paper, we examine the discrimination of emission taxes between the export and nontradable sectors in a small open
economy. A few articles indicate that there should be no differentiation of environmental policies between sectors in the
economy if the government uses indirect instruments such as emission taxes. However, we show that discrimination of emission
taxes may occur in an economy that imposes foreign investment quotas. In particular, the possibility that ecological dumping
occurs is higher if export goods are more labor intensive than import goods (as in developing countries). Moreover, in the
case where import goods are the most capital intensive, both emission tax rates may be lower than the marginal environmental
damage, and ecological dumping may occur. It is also shown that easing foreign capital quotas may deteriorate the country’s
welfare. |
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Keywords: | |
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