Abstract
In his seminal paper, Markusen [1975] shows that PPM spill-over externalities add a further motive for a large country to levy a tariff if it imports the good whose PPM generates the spill-over pollution.1
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Similar results have been developed graphically by Baumol [1971] and Baumol & Oates [1988 ch.16], in a partial equilibrium model by Ludema & Wooton [1994] and Mæstad [1998] and in a general equilibrium Ricardo-Viner model by Rauscher [1991b].
We assume that the global nature of pollution does reduce the export tax but does not reverse its sign.
Compare Baumöl & Oates [1988, ch. 16].
We assume that all conditions mentioned in chapter 4 hold.
It is given by the intersection of R(g(τ(p))) and r( τ (p)(G) - foreign’s reaction curve which traces the tax foreign charges in response to home’s tax-tariff combination, and home’s reaction curve which traces the tax home charges in response to foreign’s NIMBY policy if it can levy an eco-tariff.
Reasons for failure to implement environmental policies may be manifold. It could be that the government does not maximise social welfare by refraining from taking environmental regulatory measures. Alternatively, it may be possible that although government is willing to implement such environmental measures, it is not possible because of pollution measurement problems, or the absence of a suitable tax collecting agency.
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© 2000 Springer Science+Business Media Dordrecht
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Kraus, C. (2000). Tariffs as Second Best Instruments to Internalise Spill-over Externalities. In: Import Tariffs as Environmental Policy Instruments. Economy & Environment, vol 19. Springer, Dordrecht. https://doi.org/10.1007/978-94-015-9614-5_9
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DOI: https://doi.org/10.1007/978-94-015-9614-5_9
Publisher Name: Springer, Dordrecht
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