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    Trade and Commodity Taxes as Environmental Instruments in an Open Economy (2020)

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    Type of Content
    Journal Article
    UC Permalink
    https://hdl.handle.net/10092/100837
    
    Publisher's DOI/URI
    http://doi.org/10.1108/JES-08-2019-0362
    
    Publisher
    Emerald
    ISSN
    0144-3585
    Collections
    • Business: Working Papers [193]
    Authors
    Koska OA
    Stähler F
    Yeni O
    show all
    Abstract

    © 2020, Emerald Publishing Limited. Purpose: In a simple reciprocal dumping model of trade, this study scrutinizes the strategic role of trade and commodity taxes as environmental instruments when consumption of an imported product generates pollution. The results suggest that for sufficiently small values of the marginal disutility from pollution, commodity taxes can be preferred over import tariffs, and compared to the case of trade policies, free trade can be welfare dominating even for higher values of the marginal disutility from pollution when commodity taxes are used strategically as environmental instruments. Design/methodology/approach: The authors employ a reciprocal dumping model of trade. Findings: A sufficiently high marginal disutility from pollution (or sufficient asymmetries between the countries in terms of their marginal disutility from pollution) may jeopardize bilateral trade, especially if countries are given the option to set tariffs freely for imported goods (consumption of which generate environmental pollution). For sufficiently weak transboundary pollution and sufficiently low marginal disutility from pollution, (1) both Nash trade and domestic policies may prove to be helpful in addressing consumption-based pollution, and (2) it is possible to show in such a case that Nash domestic policies may be preferred over Nash trade policies, especially when both transboundary pollution and the trading partner's marginal disutility from pollution are sufficiently low. Originality/value: The novel contribution of this paper is (1) to capture asymmetries among trading partners in terms of how much they account for environmental pollution when deciding on their (domestic/trade) policy measures and (2) to focus on environmental degradation that is caused by final consumption of a product imported from a trading partner.

    Citation
    Koska OA, Stähler F, Yeni O, others (2020). Trade and Commodity Taxes as Environmental Instruments in an Open Economy. Journal of Economic Studies. 23 June 2020. Emerald. ERC-Economic Research Center, Middle East Technical University. Emerald.
    This citation is automatically generated and may be unreliable. Use as a guide only.
    Keywords
    international trade; consumption-generated pollution; trade policy; commodity taxes
    ANZSRC Fields of Research
    35 - Commerce, management, tourism and services::3507 - Strategy, management and organisational behaviour::350706 - International business
    15 - Commerce, Management, Tourism and Services::1503 - Business and Management::150309 - Logistics and Supply Chain Management
    38 - Economics::3899 - Other economics::389902 - Ecological economics
    Rights
    Creative Commons Attribution Non-commercial International Licence 4.0 (CC BY-NC 4.0)
    http://hdl.handle.net/10092/17651

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