Can Cross-Border Pollution Reduce Pollution?

Hatzipanayotou, Panos; Lahiri, Sajal; Michael, Michael S.

doi:10.2139/ssrn.261014

Can Cross-Border Pollution Reduce Pollution?

20 Pages Posted: 20 Feb 2001

See all articles by Panos Hatzipanayotou

Panos Hatzipanayotou

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

Sajal Lahiri

Southern Illinois University Carbondale - Department of Economics

Michael S. Michael

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

There are 2 versions of this paper

Date Written: November 2000

Abstract

We develop a North-South model of foreign aid and cross-border pollution resulting from production activities in the recipient country. There is both private and public abatement of pollution, the latter being financed through emissions tax revenue and foreign aid. We characterise a Nash equilibrium where the donor country chooses the amount of aid, and the recipient chooses the fraction of aid allocated to pollution abatement and/or the emission tax rate. At this equilibrium, an increase in the donor's perceived rate of cross-border pollution reduces net emission levels.

Keywords: Cross-border pollution, pollution abatement, foreign aid

JEL Classification: Q28, F35, H41

Suggested Citation: Suggested Citation

Hatzipanayotou (Xatzipanagiotou), Panagiotis (Panos) and Lahiri, Sajal and Michael, Michael S., Can Cross-Border Pollution Reduce Pollution? (November 2000). Available at SSRN: https://ssrn.com/abstract=261014 or http://dx.doi.org/10.2139/ssrn.261014