Michael Rauscher

Environmental regulation and the location of polluting industries

Does international tax competition in the environmental field lead to undesirably low levels of environmental regulation and to unacceptable disruptions of environmental quality? The paper tries to answer this question in a noncompetitive partial-equilibrium framework. There is one firm that wishes to establish a plant in one ofn countries. The paper shows that tax competition may lead to emission taxes that are either too low or too high. They may be so high that the investment is not undertaken, although this would be optimal if the countries cooperated. On the other end of the spectrum, a scenario in which taxes are driven to zero becomes possible if there are substantial transfrontier pollution effects.

Keeping up with the Joneses: Chaotic patterns in a status game

Abstract The paper is concerned with the dynamics of a two-players status game. There is a Nash equilibrium in status-seeking activities and one can show that chaotic adjustment pathe are possible for particular parameter constellations.

Conspicuous Consumption, Economic Growth, and Taxation

Commodities do not only serve the purpose of satisfying direct needs in the production and consumption process. Some of them are also used to display social status and to affect the position of an individual in society. The paper looks at status-seeking activities in an economic-growth context. Two questions are asked. Does status-seeking behavior accelerate economic growth? And: should capital accumulation be subsidized to correct for the status externality? The answers to both questions are ambiguous.

Trade, tropical deforestation and policy interventions

Trade interventions are increasingly advocated as a means for controlling timber-related tropical deforestation. This paper analyzes the impact on deforestation of such policy instruments in a dynamic framework. The forest is modelled as a potentially renewable resource, and timber is extracted for purposes of export and domestic consumption. Optimality conditions for a variety of model specifications are derived, and the impacts of changes in the terms of trade and market structure on long-run deforestation are analyzed. The results of this analysis suggest that trade interventions that seek to affect the terms of trade against the export of tropical timber products are in the long run a second-best policy option for influencing the deforestation process.

Environmental Policy, Intra-Industry Trade and Transfrontier Pollution

The paper discusses effects of domestic environmental policy on foreignemissions and on transboundary pollution. We use a Dixit-Stiglitz typemodel of monopolistic competition with an endogenous number of firms.Production generates environmental externalities which spill over to theother country. It is shown that environmental policy has an impact onmarket structure at home and abroad. These market structure effectsinduce changes in emissions abroad. In contrast to what has been derivedin earlier contributions, it turns out to be possible that tighterenvironmental standards at home lead to less emissions abroad. The paperderives these results and provides the economic intuition behind them.Finally, conditions for optimal environmental policies are derived.

National environmental policies and the effects of economic integration

Abstract The creation of the internal market in Europe has raised the question of how the relocation of factors and the distribution of welfare gains are affected by the institutional competition among the countries involved. This paper is particularly concerned with environmental regulation. A two-country model is considered in which each country chooses its environmental policy in response to foreign policies which the country considers to be given. There are two types of externalities, a transboundary pollution spill-over and an effect on the rate of return on the mobile factor. The process of economic integration is modelled by lowering the costs of factor mobility. The impact on the environmental policies chosen by the countries and the welfare effects are analysed. The results are used to derive policy implications concerning the issues of institutional competition and the potential gains from cooperation.

International Trade, Foreign Investment, and the Environment

The 1990s produced a large literature on foreign trade and the environment, including both theoretical and empirical contributions. The paper surveys this literature. It starts by looking at the traditional Heckscher-Ohlin type models of international trade and then moves to noncompetitive models and the strategic use of environmental policy in open economies. A shorter section is devoted to public-choice approaches to environmental policy. Moreover, the paper deals with factor mobility and interjurisdictional competition, with intertemporal issues such as renewable resources and foreign indebtedness, with the empirical evidence, and with institutional issues related to the World Trade Organization and international environmental agreements.Basically three questions are addressed from different points of view:- Are trade liberalisation and increased factor mobility good or bad for the environment?- Are there larger incentives to relax environmental policies if economies are more open?- Do we have to expect a race towards the bottom in environmental regulation if trade and international factor movements are liberalised? The answers to all these questions are ambiguous. Since many of the recent contributions to the theoretical literature model second-best worlds, in which the environmental externality is only one of several distortions of the economy, the results depend crucially on the nature of the other distortions. This survey paper gives an overview of this literature and explains the contradictory results. On the empirical side, the results are inconclusive as well. The link between environmental policies on the one hand and international trade and factor movements on the other is much weaker than one might have expected given the intensity and controversy of the policy debate at the turn of the century. Based on the theoretical results and on the empirical evidence, the paper finally tries to identify promising areas of future research. In spite of much progress made in the last decade, much remains to be done.

Demand for social status and the dynamics of consumer behavior

Abstract The article is concerned with the dynamics of status-seeking activities. Status seeking produces externalities since the improvement of the social status of one person implies the deterioration of the social status of at least one other person. This may have two effects. On the one hand, other people may be driven to increase their status seeking efforts and this implies a rat race or treadmill. On the other hand, there is a discouragement effect which makes people drop out of the treadmill. It is shown in a model of dynamic adjustments that the combination of these effects may lead to cyclical or chaotic patterns of demand for status goods.

Environmental policy in an international perspective

List of Contributors. Preface. Introduction L. Marsiliani, M. Rauscher, C. Withagen. International Regimes and Policy Strategies for Climate Change Control C. Carraro. New Developments in Coalition Theory: An Application to the Case of Global Pollution M. Finus. The Impact of International Environmental Agreements: The Case of the Montreal Protocol T. Swanson, R. Mason. International Environmental Agreements Reconsidered: Stability of Coalitions in a One-Shot-Game W. Buchholz, W. Peters. Inducing Environmental Co-operation by the Design of Emission Permits C. Ohl. Trade and the Environment: A Survey of the Literature D.M. Sturm. International Trade and the Environment: The Real Conflicts W. Althammer, S. Droge. Environmental Policy and International Trade: Are policy Differentials Optimal? C. Elbers, C. Withagen. Unilateral Pollution Control: Complementarity versus Substitutability of Trade and Environmental Policies Y. Hiriart. Carbon Leakage: Interaction of Primary and Final Goods Markets B. Lunenburger, M. Rauscher. Environmental Policy Reforms in a Small Open Economy with Public and Private Abatement P. Hatzipanayotou, S. Lahiri, M.S. Michael. National Environmentally Counterproductive Support Measures in Transport: A Transboundary Pollutant K.W. Steininger. Strategic Competition in Environmental and Fiscal Policies: Theory and Evidence from the United States D.L. Millimet, P.G. Fredriksson, J.A. List. Limiting Political Discretion and International Environmental Policy Coordination with Active Lobbying S. Johal, A. Ulph.

Tax Competition, Capital Mobility and Innovation in the Public Sector

Abstract The paper analyses the impact of tax competition on innovation in the public sector. It is shown that the effects of increased mobility of the tax base on innovation and growth are ambiguous. The negative relationship is more likely, however. Moreover, it is shown that a Leviathan government may be induced to spend a larger share of its budget on unproductive activities.