Abstract
We use a three country-one good oligopoly model to analyze the impact of a Free Trade Areas (FTA) between countries 1 and 2 on tariffs and pollution taxes in the presence of both local and trans-boundary pollution. We show that FTA between countries 1 and 2 does not necessarily lower tariffs imposed by FTA members on country 3 while tariffs imposed by country 3 (rest ofthe world) will higher. Furthermore, FTA will lower pollution taxes imposed by FTA members while it will raise taxes imposed by rest of the world. We show that under FTA while the environmental taxes are lower for all three countries tariffs imposed by FTA members are lower but the tariff imposed by country 3 is higher.
Recommended Citation
Dasgupta, Manabendra and Lee, Seung Dong
(2015)
"Trans-boundary Pollution and Strategic Environmental Policy,"
Journal of Business, Industry, and Economics: Vol. 20, Article 1.
Available at:
https://roar.una.edu/jobie/vol20/iss1/1