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Trade Liberalization and Environmental Taxation in Federal Systems

Trade Liberalization and Environmental Taxation in Federal Systems The literature on trade liberalization and environment has not yet considered federal structures. In this paper, we show how the design of environmental policy in a federal system has implications for the effects of trade reform. Trade liberalization leads to a decline in pollution taxes, regardless of whether pollution taxes are set at the federal (centralized) or local (decentralized) level, and it increases social welfare. The effect under a decentralized system is smaller than if these taxes are set by the federal government, and pollution emissions therefore decline in this case. Moreover, majority bias interacts with trade liberalization if federal taxes are used. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Scandinavian Journal of Economics Wiley

Trade Liberalization and Environmental Taxation in Federal Systems

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References (55)

Publisher
Wiley
Copyright
© 2016 the editors of The Scandinavian Journal of Economics .
ISSN
0347-0520
eISSN
1467-9442
DOI
10.1111/sjoe.12127
Publisher site
See Article on Publisher Site

Abstract

The literature on trade liberalization and environment has not yet considered federal structures. In this paper, we show how the design of environmental policy in a federal system has implications for the effects of trade reform. Trade liberalization leads to a decline in pollution taxes, regardless of whether pollution taxes are set at the federal (centralized) or local (decentralized) level, and it increases social welfare. The effect under a decentralized system is smaller than if these taxes are set by the federal government, and pollution emissions therefore decline in this case. Moreover, majority bias interacts with trade liberalization if federal taxes are used.

Journal

The Scandinavian Journal of EconomicsWiley

Published: Jan 1, 2016

Keywords: ; ; ; ; ; ; ; ;

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