Thomas Ziesemer, Peter Michaelis
Strategic Environmental Policy and the Accumulation of Knowledge
Abstract:
Recent political discussions about the possible advantages of
first-mover behaviour in terms of environmental policy again called
attention to the well-established controversy about the effects of
environmental regulation on international competitiveness. Conventional
theory claims that the trade-off between regulation and competitiveness
will be negative while the revisionist view, also known as the Porter
Hypothesis, argues for the opposite. Several previous attempts that
analysed this quarrel by means of strategic trade game settings indeed
support the former claim and conclude that, to increase a
firm’s
competitiveness, ecological dumping is the most likely outcome in a
Cournot duopoly configuration. However, these results were derived from
one period games in which so-called innovation offsets are unlikely to
occur. The present paper considers a two-period model that includes an
intertemporally growing firm-level knowledge capital. In doing so the
accumulation of knowledge is modelled in a unilateral and a bilateral
variant. It is shown that for both scenarios in period 1 the domestic
government will set a higher emission tax rate compared to its foreign
counterpart. Furthermore, we identify conditions for which the domestic
tax rate will be set above the Pigouvian level in period 1 in both
model variants.
JEL: F18, Q55, Q58
Paper:
Paper available as pdf-file.
Beitrag Nr. 301, Volkswirtschaftliche Diskussionsreihe, Institut
für
Volkswirtschaftslehre der Universität Augsburg
Contact:
Thomas
Ziesemer, University of Augsburg, Department of Economics,
D-86135
Augsburg,
Germany, phone +49-821-598-4061, fax +49-821-598-4217,
email: thomas.ziesemer@wiwi.uni-augsburg.de
Peter
Michaelis, University of Augsburg, Department of Economics,
D-86135
Augsburg,
Germany, phone +49-821-598-4057, fax +49-821-598-4217,
email: peter.michaelis@wiwi.uni-augsburg.de
v.
K., 26.08.2008