Optimal Tax Policies with Private-Public Clean-Up, Cross-Border Pollution and Capital Mobility

31 Pages Posted: 18 Dec 2002

See all articles by Costas Hadjiyiannis

Costas Hadjiyiannis

University of Cyprus - Department of Economics

Panos Hatzipanayotou

Athens University of Economics and Business; CESifo (Center for Economic Studies and Ifo Institute)

Michael S. Michael

University of Cyprus - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: December 2002

Abstract

This paper builds a model of a region with two non-identical countries, cross-border pollution and free movements of goods and capital within the region. Pollution reduces welfare and there is simultaneous private and public pollution abatement. Public pollution abatement is financed with the use of lump-sum and pollution tax revenue. The introduction of public pollution abatement enables us to derive the optimal pollution taxes in terms of the marginal cost of public pollution abatement. We derive and compare for each country the Nash and cooperative lump-sum and pollution taxes and examine how cross-border pollution and capital mobility affect them. Finally, we examine the impact of capital mobility on the effectiveness of pollution taxes on net pollution.

Keywords: Optimal Taxes, Public Pollution Abatement, Cross-Border Pollution, Capital Mobility

JEL Classification: F18, F22, H21

Suggested Citation

Hadjiyiannis, Costas and Hatzipanayotou (Xatzipanagiotou), Panagiotis (Panos) and Michael, Michael S., Optimal Tax Policies with Private-Public Clean-Up, Cross-Border Pollution and Capital Mobility (December 2002). Available at SSRN: https://ssrn.com/abstract=355623 or http://dx.doi.org/10.2139/ssrn.355623

Costas Hadjiyiannis

University of Cyprus - Department of Economics ( email )

75 Kallipoleos Street
P.O. Box 20537
1678 Nicosia
Cyprus

Panagiotis (Panos) Hatzipanayotou (Xatzipanagiotou) (Contact Author)

Athens University of Economics and Business ( email )

76 Patission Street
Athens, 104 34
Greece

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Michael S. Michael

University of Cyprus - Department of Economics ( email )

75 Kallipoleos Street
P.O. Box 20537
1678 Nicosia
Cyprus
357-22892433 (Phone)
357-22892432 (Fax)

HOME PAGE: http://www.econ.ucy.ac.cy/staff/michael.htm

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

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