| Author/Presenter |
Ida Ferrara (York University) |
| Co-authors |
Paul Missios (Ryerson University) |
| |
Halis Murat Yildiz (Ryerson University) |
| Title |
Imperfect Competition, Comparative Advantage, and Environmental Federalism |
| Abstract |
In this paper, we compare endogenous environmental policy setting with centralized and decentralized governments when regions have comparative advantage in different polluting goods. We develop a two-region, two-good model with inter-regional environmental damages and imperfect competition in product markets, where both regions produce both goods. Despite positive spillovers of pollution across regions, the model predicts that decentralization may lead to weaker or stricter environmental standards or taxes, depending on the degree of regional comparative advantage and the extent of transboundary pollution. This suggests that federalism can lead to either a "race to the bottom" or a "race to the top," without relying on inefficient lobbying efforts or capital competition. |
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